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Can remote employees trigger nexus?
byOctober 29, 2021
We all know how the pandemic has changed the world we live in. We could spend hours talking about the impacts of COVID-19, but for now, we’ll focus on one big change – remote work. While we’ve all been working from our home office, CFOs across the board have been left with the question, can remote employees trigger nexus?
Let’s see if we can help there.
Short answer? Yes.
For the 46 states with state or local sales tax, they each have their own definitions of what defines nexus in their state. And while each state’s definition is different, most states agree that having a headquarters or office in a state creates nexus. So for companies with an office in a certain state, they are well aware of their sales tax responsibilities, you have nexus in the state you are headquartered in, simply put. However, with the pandemic forcing everyone to work from home, the lines have gotten a little blurred.
This is because for most states, having just one employee working in a state will trigger nexus. So over the last year, some companies went from only have nexus in one state to having nexus in multiple states. If you think about it, sales tax laws have been around for a while, before the remote work movement took off. It’s likely the states didn’t see a need to create any parameters about how many employees were located in the state or for how long they were working in that state.
Nevermind the reason, what is important to know is that having an employee working in a state can trigger nexus, and leave you on the hook for sales tax responsibilities. And with many companies looking to be remote friendly post-Covid, this is something to get ahead of to ensure your company stays compliant now and in the future.
Next step – do some research
Before you panic, it’s important to understand state laws that might apply to you and your employees. Where are your employees located? Once you start with this list, you can research these specific state laws and see how having an employee there impacts your sales tax obligations.
Staying compliant also means the financial leaders being in tune with overall company recruitment goals. When hiring in a new jurisdiction, it means a new team member but also a new sales tax responsibility. So it’s important to work together with the hiring team to make sure onboarding for new employees also means onboarding new nexus states.
Sales tax information when you need it
Keeping up with the varying state laws and changes can be a full-time job. Luckily, TaxJar is full of people who love sales tax research, so you don’t have to worry about doing the heavy lifting. Our Sales Tax blog is full of helpful articles like What is Nexus and Economic Nexus Laws by State. Our Sales Tax Fundamentals will walk you through the ins and outs of sales tax and give you an overview of the different aspects like nexus, filing, and remittance. We also have a portal of free, on-demand webinars that cover topics like economic nexus, multi-channel sales tax reporting, and trends in e-commerce.
If you are realizing you have nexus in some new states, not to worry. Our Nexus Guide can help you get started on sales tax compliance.
Understand economic nexus with this guide
Knowing where you have nexus and need to collect sales tax is complicated. This guide will walk you through how to determine if you have nexus, and what to do when you reach the threshold.Download the guide