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Ignore sales & income tax nexus at your own peril

Written on Sep 29, 2022

By Jessica Salerno-Shumaker, OSCPA senior content manager 

CPAs would be wise to pay close attention to state nexus requirements or risk making themselves and their clients vulnerable, says one tax expert.  

Popp“There should be a true appreciation for the level of risk that a company runs into if they decide not to comply with this,” said Joseph Popp, JD, director of SALT services at Rea & Associates, Inc. 

Popp will present on nexus at the upcoming Mega Tax Conference on Dec. 13 & 14, covering filing requirements, communications with clients and more. One of the most popular questions Popp said he hears from clients is how to handle nexus in a hybrid and remote workforce, such as the implications of hiring someone from out of state who will work virtually.  

Those CPAs that work in industry need to be aware there can be personal liability in making decisions surrounding state and local tax requirements and should be taken just as seriously as federal requirements.  

“This has just happened with a client of ours in New York, where some people are getting notices that they may be on the hook for some of these taxes if the company can't pay,” he said. “It's absolutely something that those folks need to think about.”  

If you have a filing requirement and choose not to adhere to it, Popp said, then you can breach some of your covenants in your employment contract and liability insurance coverage. The consequences of this can be unpleasant for the CPA.  

A common misconception Popp hears is that being under a certain monetary threshold in a state means sales tax nexus doesn’t apply, which he said is false.  

“If you have physical presence, a person, a remote worker, inventory or a laundry list of different things in a state, you’ve got nexus,” he said. “It doesn't matter if you're selling $1 or a billion dollars.”  

CPAs who ignore nexus requirements are taking unnecessary risks, Popp said, and it could prove detrimental to themselves and their clients in the long term.  

“If you're not talking to your clients about this, if you're not looking at it internally, you really are flying without the wings on your aircraft,” Popp said. “You’re going to stay afloat for a while, but eventually, you're just going to crash.”  

To hear more on this topic, register now for the Mega Tax Conference