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Nexus tax web isn't untangling with passage of time

Back in the 1990s, the U.S. Supreme Court issued a ruling that established that if a business has a physical presence in a state, even if that presence is a person, sales taxes apply to any transactions that occur. As we noted in a series of posts more than a year ago, this notion of so-called nexus hasn't stood the test of time all that well.

Due to the expansion of online commerce, this once bright-line rule is faded. And with the development of the gig economy, the blurring continues. The result is that a Minnesota business can unexpectedly find itself in a quandary over tax obligations a state says are owed. What constitutes the creation of a business nexus seems to morph every month, triggering new legal disputes.

A new national survey of state tax departments provides the latest evidence that tax enforcement officials are still all over the board when it comes to determining what a taxable transaction is and what is not.

For example, in a world where such ride-sharing services as Uber and Lyft now flourish, only eight states responding to the Bloomberg BNA 2017 poll indicate they make efforts to collect sales taxes on the services. And experts observe that confusion extends beyond the issue of sales taxes. Questions around applying use taxes remain significant, as well.

One reason the fog is growing is that technology supporting new types of transactions is advancing faster than legislatures can react. Also, action being taken in some states is resulting in a patchwork of tax inconsistency.

In an environment where it can be difficult to know what compliance requires, consulting an experienced attorney makes sense.

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