Due to evolving nexus standards for state taxes, manufacturers may be unknowingly creating filing responsibilities for many state taxes such as gross receipts, income, franchise or sales and use taxes. Manufacturers that are conducting any of the following business activities in states where they are not filing returns may want to review the nexus standards for various state taxes:
- Having significant and recurring gross sales;
- Registering with the Secretary of State to do business;
- Soliciting sales in the state with employees or directing independent or related third parties to solicit sales on your behalf;
- Owning or leasing any real property in the state, such as a warehouse or sales office or any undeveloped realty;
- Owning or leasing any personal property located in the state, including raw materials or inventory;
- Using employees or any related/independent third party in a state to make deliveries (other than common carriers), supervise installations, make repairs, perform warranty services, provide training, resolve customer disputes or provide any service to customers in the state;
- Attending trade shows; and
- Issuing any licenses or agreements to customers for the use of intellectual property in the state, such as software licenses, trademarks, etc.
If any of the above applies to your business activities in states where you are not currently registered and filing returns, a significant nexus and a registration requirement may exist for some state taxes. Rules will vary by state. Should these activities be representative of your business in a number of states where you are not currently registered and filing returns, you should consider performing a nexus review.
In the event that you discover a registration and filing requirement in a state where you have been conducting business for an extended period of time, you may want to inquire about a tax amnesty program or consider a voluntary disclosure agreement. While amnesty programs are infrequent, almost all states have some type on voluntary disclosure program. Taking advantage of an amnesty program or voluntary disclosure agreement can result in significant saving regarding penalties, interest or tax by potentially limiting the number of prior years open to review. A Schneider Downs state and local tax professional can assist you in navigating the best course to resolve your state tax issues.
For more information, contact Jack Stewart at firstname.lastname@example.org.
Schneider Downs provides accounting, tax, wealth management, technology and business advisory services through innovative thought leaders who deliver the expertise to meet the individual needs of each client. Our offices are located in Pittsburgh, PA and Columbus, OH.
This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax-related matter.