A legal notion known as the “nexus rule” evaluates whether a company has a sufficient link to or presence in a state to be liable for that state’s sales tax regulations. The nexus law differs from state to state, but generally speaking, a company has nexus if it has a physical presence there, such a store or office, and is therefore required to collect and pay sales tax on transactions conducted there.
If remote workers engage in activities that give them a physical presence in a state, that business may have sales tax nexus. For instance, if a company employs a remote worker in a state who engages in sales activities like cold calling or visiting trade exhibitions, the company may have nexus there and be required to collect and remit sales tax on transactions done there.
Many states have economic nexus laws that mandate companies that exceed a specific level in sales within the state to collect and remit sales tax. Economic linkage laws will be present in 43 states and the District of Columbia by 2021. State-specific restrictions and minimum standards apply.
Income tax nexus does not always result from sales tax nexus. Sales tax nexus and income tax nexus are determined by different criteria. However, if a company has nexus for sales tax purposes, it may also have nexus for income tax purposes, necessitating the filing of income tax returns and the payment of income tax on income derived from sources within that state.
With a total sales tax rate of 8%, Cuyahoga County has the highest tax burden in Ohio. A legal notion known as the “nexus rule” evaluates whether a company has a sufficient link to or presence in a state to be liable for that state’s sales tax regulations. Many states have economic nexus regulations, and remote workers may give a company sales tax nexus. Businesses having sales tax nexus may also have income tax nexus in the same state, while it is not a requirement for income tax nexus to exist.