What to do when you no longer have sales tax nexus
by November 1, 2022
So you once had sales tax nexus in a state and now you don’t.
This can occur for a number of reasons, including:
- You moved and no longer have an office or physical warehouse in a state
- You no longer have an employee or satellite office in a state
- You stopped selling on FBA, meaning you no longer have nexus in states where you have no physical presence other than storing goods in an Amazon Fulfillment Center
- You’ve shut down your e-commerce business
On one hand, you’re free. No more keeping up with sales tax filing due dates and remitting sales tax filings in that state.
But before you get too excited and erase your eFiling password from memory forever, don’t forget to take one final step.
Notify states when you no longer have sales tax nexus
Just like you filed for a sales tax permit, the state also wants to know when you no longer need your sales tax permit. This might require a phone call to the state’s department of revenue or filling out a form on their website.
TaxJar blogger and CPA Georgene Harkness pointed out that notifying a state that you no longer have nexus is often “as simple as a checkbox on your last return.”
If you fail to notify states that you’ll no longer have sales tax nexus there, they will expect to see your tax returns continue to come in. And if you stop filing, they’ll start charging late fees, which can be $50+ per period where you don’t file.
Some states also have a “trailing nexus.” In the state’s eyes, perhaps business activities you performed in the state (like sending a salesperson to a trade show) will continue to give you sales after your “significant presence in the state” ends. While this isn’t likely true for Amazon FBA sellers, be sure to check and find out if you’re dealing with a state with “trailing nexus.”
Long story short, if you no longer have sales tax nexus in a state, your first step is to let the state know. If the state has trailing nexus, they may want you to continue to file zero returns for a few more return periods.
