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Nexus Questionnaires Resulting in Big Dollars from Taxpayers

June 1st, 2016 by Judd Ballard

Well Big may be an exaggeration, but it happens more than states are willing to publicize. Here’s why – the two worst things you can do with a nexus questionnaire:

  1. Throw it in the trash and assume you just accomplished something; or
  2. Fill it out and send it back in without first letting a CPA or SALT professional give it a look.

Typically, both result in an assessment. And typically, we (GBQ, GBQ SALT, myself, etc.!) don’t find out about either until the assessment is received in the mail. Why does this happen? Don’t let the state make a case study out of you. We beg and beg our clients to allow us to be a part of the nexus questionnaire process and it never fails someone who thinks they have it all figured out ends up with the largest exposure.

Nexus Questionnaire

The biggest problem with not giving the nexus questionnaire the attention it deserves is underestimating the fact you’re on the state’s radar. Somehow, some way, someone at the state thought it would be a good idea to contact you and now nothing else matters. And if they did enough work to find your address (and it usually doesn’t require much), you can be sure they’re willing to take it one step further by mailing an estimated assessment.

All the state is really hoping for is a response. But does that mean you fill out the entire thing and mail it back? Not yet. Next steps:

  1. Contact your CPA or SALT advisor, or better yet GBQ! We see these all the time, this is what we do. Don’t try and be the hero, it rarely works out in your favor. Just give us a chance before you stick it back in the mail.
  2. Ask questions, internally. Sales. Marketing. Accounts Payable. Do you sell there? Have you been there? How often? When was the last time you entered into a contract there? Let’s get a 30,000 ft. snapshot before you hit the panic button.
  3. Get out the calculator. How much are we talking here? Peanuts? Or is it time to get the Board of Directors on the phone?
  4. Get GBQ back on the phone. By now, you have a better understanding of how far this just got bumped up the priority list.

The nexus questionnaire means different things to different businesses. May depend on whether you’re selling tangible personal property, or just providing services. It may mean an income tax issue vs. a sales tax issue. At the end of the day, the burden of proving nexus rests with the taxing jurisdiction. Don’t give the state the satisfaction of having just plucked you out of thin air and now you’re paying for the next holiday party with penalty and interest.

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