No one likes receiving them. And more often than not, when you do, your first thought is to toss them in the trash. Out of sight, out of mind. The problem is that a nexus questionnaire means you’re on the radar. Somehow, some way, someone at the state thought it would be a good idea to contact you and now nothing else matters. 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 and follow it up with an estimated assessment.
They’ve got your attention, but can you mitigate the risks of receiving an assessment? All they want is a response. But does that mean you fill out the entire thing and mail it back? Not yet. Here’s a list of action items you should consider:
- Contact your CPA or tax advisor. Get their opinion first, they see these all the time. Don’t try and be the hero, it rarely works out in your favor. Chances are the accountant is going to recommend either filling it out with their final approval or at the very least responding with a letter.
- Start asking 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.
- Get out the calculator. How much are we talking here? Could be peanuts, could be time to get the Board of Directors on the phone.
- Get back in touch with that CPA. 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.