Sales Tax 101

What to Do When You No Longer Have Sales Tax Nexus

by Mark Faggiano

Sales Tax Nexus

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 eCommerce business altogether

On one hand, whoohoo! 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, just let the state know and you shouldn’t have any problems. If the state has trailing nexus, they may simply want you to continue to file zero returns for a few more return periods.

We first discussed this topic over at our Facebook group, Sales Tax for eCommerce Sellers. For more like this or to ask your own questions, join us there or leave a comment!

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