What is “Nexus”?
The ability of a state to tax an out of state entity depends if it can establish that there is nexus. Nexus is a Latin verb meaning to connect or bind. Nexus is established when an out of state entity has “minimum contacts” with the state to allow the state to legally nexus or bind the foreign entity to comply with the laws of the state.
What establishes “Nexus”?
As a general rule, when a company has the following it MAY be considered to have nexus:
Employees or contractors in state,
Advertising in state,
Delivery trucks in the state,
Solicitation in the state,
Promotional activities in state,
Owning property in the state,
Attending conventions or seminars in the state, or
Providing service (including warranty services) within a state.
What about an out-of-state dealer?
In Florida, section 212.0596, Florida Statutes, states that a dealer has nexus if an out-of-state dealer engages in mail order sales and the dealer is:
a resident or domiciled in this state,
the dealer maintains business locations in this state,
the dealer has agents in this state who solicit business,
the delivery of goods is in Florida that fulfills a contract entered into in Florida,
the dealer exploits the market by any media assisted advertising,
the dealer consents to the tax, and a variety of other occasions.
Furthermore, if one of the owners or officers of the company resides in Florida, then the state may viably assert nexus over the company. In short, under current Florida law if an out-of-state company meets one of the above-requirements, then Florida’s position is that the company has nexus.
I hope this helps you in clarifying when a state can tax your activities on that state. If you have any questions about state nexus, please contact me.