Staying in compliance with sales tax rules and regs just got more difficult.
Even when you have all your bases covered, new nexus complications with online purchases could create leagues of additional tax reporting overnight.
A groundbreaking nexus case provides new insight on the pitfalls you’ll need to avoid and how your company can prepare.
The set-up: New Mexico’s Dept. of Taxation and Revenue (DTR) took online bookseller Barnes & Noble to court, claiming it had nexus in the state and was responsible for remitting $534,563 in sales taxes.
The Delaware-based business had no employees or offices in NM, but a separate B&N company operated three brick-and-mortar bookstores there.
DTR argued that because the in-state stores sold membership plans and gift cards that could be redeemed online, the parent company had established nexus and had to collect sales tax.
A court of appeals ruled those activities weren’t enough to trigger nexus, but another factor was: The brick-and-mortar stores’ use of the B&N trademarks (logos, references to its website, etc.) created nexus for the online company.
Traveling trademarks = headaches
Nexus based on the use of company trademarks is a dangerous precedent set by this state, mostly because it’s so much more difficult to control.
For example, your company might occasionally send a contractor into a state to perform repairs for a customer.
The short visit might not trigger nexus, but if the contractor drives a vehicle that has your company’s logo on it, the trademark could be enough to cross that line.
Even small touches like your logo on paperwork or a mention of your company’s online sales website might lead to nexus headaches.
Consider bringing up the ruling with purchasers, salespeople and travelers – anyone who represents your company in states which it doesn’t have nexus.
On top of keeping tabs of exactly where your trademark goes, you’ll also want to review tax reporting processes for those states, just in case.