State Sales Tax Compliance for Startups
Startups face a number of challenges from hiring qualified employees, to research and development, to marketing and market research, to securing funding, and the list goes on. However, a big challenge that startups may not consider is state sales tax compliance. Businesses are required to keep up with all tax laws and are responsible for filing and paying the annual sales tax due to each state.
Sales Tax Nexus
Sales tax nexus also referred to as ‘nexus’ is the connection between your business and a state that requires you to collect and remit sales tax in that state which your business is conducted. Many things can establish nexus between a business and a state, however, the most common are having a physical office, store, warehouse, or other property. The lesser known common activities that can trigger a nexus but not limited to are; trade shows, providing services, collaborating with influencers, remote employees, and independent contractors.
Failure to file and remit the required sales tax to that state will lead your startup to be out of compliance with that state which will result in serious penalties. It can also lead to missed opportunities such as funding or acquisition deals.
For further information or support on state sales tax obligations, the team at Maemura & Co., CPAs LLP is here to help.