sales tax nexus

DOES A REGISTERED AGENT COUNT AS HAVING NEXUS IN A STATE?

Does hiring a registered agent establish nexus for your business with a state? Find out what counts as nexus and the role a registered agent plays in this:

The term nexus can be confusing, as it means different things in all states. So, whether a registered agent can count as having nexus also depends on various factors. We look at what counts as having nexus and where a registered agent falls:

What is Nexus?

There are different types of nexus, including click-through, affiliate, marketplace, and economic nexus. But often, when people talk about nexus, they do so regarding sales tax nexus as it is the most common consideration. This type of nexus exists between a state and a business and establishes a sales tax relationship. Once this has been established, the state can impose a sales tax on a business. And where this nexus is not apparent, the business does not owe the state any sales taxes.

So, how do you establish such a nexus? As we stated earlier, the term nexus comes about in different circumstances per state. And as if that is not challenging enough, the nexus terms can change. Thus, while you may not have nexus now, you could have it once the principles change.

Typically, a state will consider that you have nexus if you meet any of these conditions:

  1. You own or lease a property in the state for your business operations. It could be anything from an office to a storage space to a warehouse. You will have nexus if you have temporarily or permanently procured real estate for business use.
  2. You have hired people in the state to act on behalf of the business. This requirement often encompasses employees (both temporary and permanent) and can also include contractors and other representatives, and
  3. You have met the transaction threshold in the state even if you do not have a physical presence in the state. Most states have their threshold at $100,000 in sales or at least 200 sales.

Thanks to the economic sales tax nexus, you may still be liable to pay sales taxes to a state even if you do not reside or operate in it.

Do Registered Agents Create Nexus?

You may think that you are eligible for nexus in a state because a registered agent acts as your business rep. However, hiring a registered agent does not result in having nexus. Instead, hiring one complies with state laws that require you to have a point of contact between the state and your business.

You will create nexus in a state if you:

  1. Hire temporary or permanent workers, contractors, or representatives in your business operation,
  2. Lease or buy real estate for use in your business, or
  3. Generate more than $100,000 in sales or record more than 200 sales.

If you meet any of these criteria, you will likely have nexus in the state your business operates, with or without a registered agent.

Should You Hire a Registered Agent?

When you create a business entity like an LLC, corporation, or partnership, you must hire a registered agent. This person or company receives official correspondence on behalf of the business, enabling you to avoid legal and financial penalties. The documents include the following:

  1. Tax notices,
  2. Compliance records, and
  3. Service of process.

Working with a registered agent service is always advisable instead of serving the registered agent role yourself. You can enjoy added privacy as you won’t list your actual business address in public records. You can also receive service of process out of your workers’ earshot, allowing you to enjoy confidentiality. Plus, with a registered agent service like Passportology, you can access your mail 24/7 using an online dashboard!