.jpg?width=250&name=bigstock-Global-Studies--United-States-4804880%20(1).jpg "state tax")
Business is changing. The way entrepreneurs structure their businesses and move forward with transactions is evolving at a very fast pace. Some own business interests in various parts of the country, making states struggle to determine when that business is subject to state taxation. Others are taking part in the sharing economy, making a profit off of renting or sharing assets in a manner that makes it difficult for states to track transactions.
These changes are forcing states to reevaluate how they operate their taxation system as with many of these new types of transaction no law currently exists to apply a tax.
How are states changing their taxation systems?
Here are some of the ways that states are trying to catch their tax laws up with the evolving nature of business transactions:
- Business nexus. This term refers to the physical presence of a business within a state. If a sufficient nexus is present, the state can implement a tax on that business. A recent piece in Accounting Today discusses how business practices today can make it difficult to determine whether or not a sufficient nexus is present in the states. In an attempt to help better define this legal term, 22 states have passed laws that create this nexus whenever business employees fly to a state for purposes of the business one to four times annually.
- Shared economy. Eight states have passed legislation that requires shared economy type businesses to collect sales taxes. Some common examples of these business models includes those like Uber and Lyft, though the tax would likely extend to any business that makes a profit by renting or sharing assets owned by another. Similarly, 25 states have passed laws that require businesses like Airbnb collect taxes.
Businesses that do not stay abreast of the evolving tax laws and fail to properly collect and pay their taxes can face serious repercussions. These tax controversies can result in monetary penalties and, depending on the details, potential criminal charges. As such, businesses are wise to seek legal counsel to better ensure they are in full compliance with tax laws.
If you have concerns, it is wise to seek the counsel of an experienced tax attorney to better ensure your interests are protected. With offices in Cleveland, Ohio and Chicago, Illinois, the experienced tax attorneys at Robert J. Fedor, Esq., L.L.C. represent businesses and individuals who are in trouble with the IRS in any of the fifty states or abroad. We can help you determine the best course of action in a situation like this.
