Nexus, apportionment and tax base: A state tax compliance trifecta

The federal tax code is notoriously complex, but a multi-state and local tax professional may find managing 51 state-level taxing jurisdictions and countless locals a much more difficult task. In today’s increasingly mobile environment, understanding where your business activity creates nexus and whether, and to what extent that activity is taxable, makes accurately complying with state tax laws more than a full-time job.

Getting it wrong means the potential for double or even triple taxation, missing out on beneficial tax planning, and the always present risk of state audits. Tax revenues are declining in most states while operating costs increase. To bridge the gap, states are paying close attention to tax compliance and businesses must, too.

In the video below, our state and local tax professionals offer a quick recap of nexus, tax base, and apportionment—the three components that make state tax compliance so complicated.

If their discussion gives you pause, it may be time to revisit your approach to state tax compliance. Make sure that you—or your tax provider—closely follow state tax developments throughout the United States, including locations where you do not currently have a presence. The states are adapting to new economies and trends in taxation, requiring a coast-to-coast review of your business operations, regardless of where you may be physically present. 

This article was originally published on March 27, 2017