Nexus Mitigation

Got Nexus?

For tax purposes, nexus is defined as: the minimum connection or link necessary, which allows a state to tax you or force you to collect taxes on its behalf. This minimum link can vary from state to state as well as from tax to tax. Some nexus-creating activities are obvious, others less so.

The best way to determine if you have nexus is by making a list of all your activities in each state and then reviewing the states guidance for whether or not you have nexus on a tax by tax basis. If this task appears daunting, you may consider organizing your list into manageable groups, such as the top five revenue-producing states, and so on. Or you may prefer to outsource the process. We have three programs to help you determine your nexus footprint: nexus consultation, nexus review, and a nexus study.

If you would like to see the 6 most common nexus-creating activities visit out "Got Nexus?" page!


Some of the options available include:

Mitigation May Be Necessary

Once you have determined your nexus footprint, do not get registered without first determining if what you sell is taxable, and if so, if you have any past exposure. If you have never been registered, states will probably want you to pay back taxes, penalties, and interest for the past seven to 10 years, or longer. If you do have past exposure, you will want to review some options on how to mitigate your liabilities.

Wondering if you have Nexus? Take our free quiz to find out!

  • VDA's
  • SSTP
  • State Amnesties

Voluntary Disclosure Agreements (VDAs)

In order to encourage potential taxpayers to step forward most states offer VDA programs. A VDA is usually requested anonymously by a third party. Acceptance into a VDA program will usually limit the look-back period to three to four years, an advantage over the usual seven to 10 years if the state finds you. The taxes, penalty, and interest due prior to the look-back are usually not considered and are closed to audit upon completion of the VDA. In addition, most states will waive 100 percent of the penalty and a lesser number will waive some or all of the interest on the taxes in the look back.

The biggest drawback of a VDA is that you usually must request one before the state contacts you. Most states will disallow participation in a VDA once they find you. However, each state has its own guidelines and procedures; some written some not. Due to the large numbers of VDAs we complete on behalf of our clients, we have created our proprietary state-specific VDA knowledge base. We also have ongoing relationships with the VDA auditors, which helps us navigate some of the tougher VDA situations we see.

Nexus Case Study


RETAIL COMPANY

The Situation: A Retail Company was just beginning business and growing fast. Sales reps, outlets, contracts, trade shows, and construction projects are just a few things the company was doing. They were not sure what constituted a presence in another state.

The PJCo Result: After reviewing the facts of the business, state registrations were completed and voluntary disclosures were prepared. The company is now in compliance with the many states' registration requirements and is well positioned for future expansion and growth.

Quote: "We were heading down a precarious path. We knew we had to get a handle on these issues, but it seemed like an insurmountable obstacle. Peisner Johnson with their knowledge and understanding of state and local tax laws really saved us. Peisner Johnson filed appropriate documentation with the states and with the Voluntary Disclosures negotiated and saved us a lot of money and time and potentially serious situations with the states. We will continue to use them on all our state and local sales tax questions and issues."

Case Studies

Blissfully Unaware

Peisner Johnson & Company was approached
by an officer of a technology company with a nexus situation. Initially, all of the company’s sales were in one state.

CPA Spots Refund for New Client

We were contacted by a CPA firm that had just attended one of our nexus webinars.They did not have their own state and local tax practice, but something we said triggered a thought about something a new client had mentioned in passing. 

Why Nexus is the Next Big Thing for Firms

Nexus is a concept that many of today’s business owners don’t understand. The confusion around nexus — what it means, the tax implications, and overall compliance — represents an enormous opportunity for firms looking to expand their advisor role with existing clients and add a new and recurring revenue stream.

Nexus: It's all about physical presence. Or is it?

Nexus. It’s a fairly simple five-letter word that the Merriam-Webster dictionary defines as a connection or link. At first glance the word doesn’t appear very scary, mystical, or confusing, but when used in the context of taxes it is often one of the most misunderstood, misinterpreted, and underestimated issues; making it a very common cause of tax problems. Download the white paper to learn why this seemingly non-threatening word generates such heartburn in multi-state businesses.

Top Ten Nexus Survival Tips

Download the white paper to read these 10 helpful tips for dealing with nexus.