Nexus and your multi-state corporation

If you are operating a business out of Illinois in multiple other states, you might find that taxes are piling up in certain states. Nexus can be a huge hassle when specific activities cause use and sales tax, franchise or other business tax. Some business owners might not be familiar with a few of the taxes that can be imposed on their out of state business.

Nexus is formed if your corporation has people or property in a state, even temporarily. This could be a warehouse facility or traveling roadshow. Though it is often not clearly defined by each state, once residency of your business has been established nexus is created. Some states institute this statute after just one day, others have a period of several days.

Nexus is controlled under the Due Process Clause and Commerce Clause of the U.S. Constitution. The Due Process Clause outlines requirements that there be links between the business, individual or property while the Commerce Clause requires a larger presence.

There are two different types of nexus. The first, click-through nexus legislation, simply requires a salesperson to meet a minimum sales bracket in the state other than where the corporation resides. Affiliate nexus has higher standards that must be met, such as substantial interest being held in another state.

Before you operate your business in another state that is not your own, be sure to review that state's individual laws and definitions outlining nexus. If you have additional tax questions, speaking to an experienced attorney might be beneficial. 

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