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Specialty Tax Spotlight – Economic Nexus

Video
Learn the differences between sales tax and income tax nexus, evolving state and local tax rules, and important tax considerations for businesses, in this episode of Specialty Tax Spotlight.
October 14, 2024
Sean Muller
Sean Muller
Partner-in-Charge, Specialty Tax Services
Blake Fuqua
Blake Fuqua
Partner-in-Charge, State and Local Tax
Savannah Brown
Partner-in-Charge, State and Local Income Tax

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Specialty Tax Spotlight

In this episode of Weaver: Beyond the Numbers, Specialty Tax Spotlight, Sean Muller, Blake Fuqua and Savannah Brown break down the increasingly important topic of economic nexus. They explain how businesses, regardless of physical presence, may now be subject to state and local tax laws through this concept. With states becoming more aggressive in pursuing tax obligations, understanding economic nexus is essential for businesses operating in multiple jurisdictions.

Key Points:

  • Economic nexus allows states to impose tax without requiring a physical presence, impacting sales and income taxes.
  • Different states have varying thresholds for economic nexus, making it critical to track sales and services across jurisdictions.
  • Public Law 86-272 may offer protection for state and local income tax in some cases, but businesses must remain vigilant in assessing their tax obligations.

 

The conversation focuses on how economic nexus transforms state tax collection, moving beyond the traditional physical presence requirement. Muller, Fuqua and Brown discuss how nexus affects sales tax and income tax differently, with the team underscoring the need for businesses to understand specific state thresholds. They also touch on the significance of Public Law 86-272 and how it might still protect companies from income tax in certain circumstances.

“Just because you exceed a sales tax threshold doesn’t mean you have an income tax obligation — but understanding the rules for each tax is critical,” Brown said.

Fuqua and Brown shed light on the differences between sales tax and income tax nexus, discussing how evolving tax rules affect companies in today’s increasingly digital economy. The panel emphasizes the importance of reviewing state-specific rules to avoid surprises in audits and filings.

Understanding economic nexus and its impact on tax obligations can be tricky, but navigating these complex regulations is crucial for businesses.

Subscribe and listen to future episodes of Weaver: Beyond the Numbers on Apple Podcasts or Spotify.

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