campaign that brings the business into a new state, as this may create tax liability for the business in that state. Do Businesses Always Try to Avoid Nexus? Given that nexus typically entails payment or collection of tax in a state, most businesses try to avoid nexus in additional states. However, in certain circumstances, nexus in another state may be helpful. For example, to apportion income for Nebraska income tax purposes, a corporation must have nexus in at least one other state (meaning that another state can impose income tax on the corporation). A corporation may reduce its tax bill by organizing its affairs in order to have nexus in one other state, so they can apportion some or all of their income away from Nebraska. When Can Nexus Be Created Inadvertently? In our practice, we’ve seen a number of times where a business unexpectedly obtained nexus in a state. These arose in the following situations: Remote Employee. As noted above, having an employee in a state generally creates nexus for a business. As employees work from home or remotely, and move to different locations, it can be easy for a company not to realize that its employee who moved to California created nexus in California for that company. Unexpected Sales. Most states have set a minimum threshold of activity in the state before a business is required to collect sales tax in that state. However, this is generally measured on an annual basis. An unexpected amount of sales in a state can therefore trigger nexus in that state under an economic presence theory. Travel Into a State for a Conference. Some states have taken the position that travel into their state for business purposes, including for a conference, creates nexus in that state. Property Storage. Many businesses hire other companies to help manage and store their inventory. Sometimes those businesses do not even knowwhere their inventory is stored.Many states have taken the position that any inventory storage in their state creates nexus—even when the company itself did not direct the inventory into the state. Does Public Law 86-272 Provide Protection? Public Law 86-272 is a federal law enacted to restrict a state’s ability to impose income tax on businesses engaged in interstate commerce. In short, the law protects an out-of-state business from having to pay a state’s income tax if that business’ only activity in the state is the solicitation of orders for tangible personal property, when the orders are approved and shipped from outside the state. The law lists a number of actions undertaken by businesses that will not, by statute, create taxable nexus. However, the law will not protect a business that takes an action which is not specifically listed in the statute itself. In practice, this lawwas enacted in 1959 and has not been updated. Accordingly, it does not ref lect the way most businesses currently BUILD YOUR CAREER HERE. We’re Hiring. Come see what all the noise is about. In a collaborative atmosphere of expertise and knowledge sharing With a team of professionals who value innovation, intelligence and integrity Support in finding your right work/life balance fzacpa.com 402.496.9100 19 nebraska society of cpas W W W . N E S C P A . O R G
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