Tax Services State Tax Check-Up: Income Tax Nexus
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As the fall compliance season begins and extended income and franchise tax returns are being filed, it is a good time to perform a nexus check-up. A nexus check-up is simply a review of your company’s activities within each of the 50 states to determine if there has been any new activity in a state that might create a substantial connection with and filing obligation for your company in that state.

The first, and perhaps most critical, step in your nexus review is to develop a comprehensive list of the following:

  • All states in which your company is registered to do business;
  • All states in which your company is registered with the Department of Revenue or other state agencies (such as the Department of Labor for unemployment insurance tax purposes);
  • All states in which your company leases, owns, or rents real or tangible personal property;
  • All states in which your company has employees or pays any wages or salaries;
  • All states in which your company makes sales of tangible personal property;
  • All states in which your company uses intangible property;
  • All states in which your company performs services.

This information will aid you and your tax advisor in determining whether your company has any new or different income tax filing requirements as a result of this activity. Importantly, this review may also show that there are certain jurisdictions where returns are no longer needed.

In addition, your tax advisor can tailor your nexus analysis to your specific type of business. For example, there are often special nexus considerations for those engaged in manufacturing, sales of tangible goods, and businesses involving digital goods, cloud computing, or similar technology. Finally, reviewing your company’s income tax nexus profile also provides you with an opportunity to examine your nexus profile and filing obligations for other purposes, such as sales and use tax, income tax withholding for employees, and unemployment insurance taxation.

Ready for your nexus check-up? P&N has a team of state and local tax professionals ready to discuss your company’s nexus obligations.

Contact us

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