Tax ramifications refer to the tax consequences of an action. It is the impact of tax on undertaking certain transactions or in a business situation. Business nexus refers to the amount and degree of operations a business carries out before the state imposes a tax on the amount of income it receives. Once the criterion has been established, the owner of the business is responsible for collecting and remitting the amount of tax to the relevant tax authority in the relevant country. Therefore, business nexus tax ramification is the tax consequences of the actions or activities undertaken by business and the extent to which such activities qualify for taxation. A business may be subject to pay tax if the amount of income from the auction of its products exceeds $10,000. A business is liable to taxation depending on its presence in a country. A business with permanent residence in a country is liable to pay tax in that country. Permanent residence may be as a result of having a business location in the country and having resident employees or property. The property includes both the tangible and intangible assets. Temporary residence of a business in a country may involve engaging in regular and systematic conduct of business. In such a case, the business ought to pay tax .
The business tax ramifications depend on the nature of the transaction. There are specific ramifications for business which carry out their transactions online. The ramification also may depend on the amount of revenue of a business. A business with state connection in the United States pays tax at a lower threshold than companies or business without connection. All businesses transacting active businesses in the United States are required to report and pay federal taxes on the amount of income they receive from the business. The threshold of the amount of tax depends on the state in which the company is in service.
The creation of business nexus tax depends on three factors. A business which makes it sales within the country is required to pay tax. The second factor involves leasing activities. In case a business leases property in the country, it’s subject to pay tax. In case the business employs people who reside in the country its carrying out operations, it’s subject to state tax. The extent to which the activities are subject to tax varies from state to state. Each state has its own specific requirements which determine how much activity leads to taxation. The constitutional principles, judicial doctrine and the federal law govern the business nexus ramifications in a country.
Canadian enterprises tend to be more subject to state taxes than federal taxes in the United States. Some of the business activities which are subject to nexus tax include soliciting sales in the United States and shipping goods and services to the United States where the title of the goods is exchanged. Employees who make frequent trips to the United States for selling purposes or attend trade shows in the United States are subject to nexus tax. However, the employees will be subject to nexus tax in case their conduct marketing activities while attending the trade shows. Employees who travel to the United States to install or service business products are also subject to business nexus tax. In addition, in a situation where the employees provide training services, they will be liable to pay business nexus tax. It will be deemed that they have earned income in the United States. In some situations, delivery of goods by means of personal vehicles in the United States requires payment of business nexus taxes .
A business, which sells goods and services over the internet, is also subject to business nexus tax. E- Commerce businesses ought to pay federal income taxes. The mode of selling the business products is immaterial in determining whether the business should pay tax or not. Tariffs and custom duty tax are imposed by the United States federal government for goods imported overseas through the internet. Each commodity has its own custom duty. The amount of tariffs and custom duties will depend on the state of origin of the commodities. The same type of tax is imposed on goods which are purchased offline. The medium of delivery of the goods imported may bring a difference in tax imposition. No tariffs are applicable for software programs, which are delivered online. Off-the-shelf commodities are subject to custom duty .
Documentation of the business nexus tax involves preparation of the corporate tax returns. The returns are prepared after capturing and tracking all the business activities on a state by state level. This involves keeping a record of all transactions of the business with the respective state in which the activities were carried out. The record helps in providing the details required to prepare the returns. Some of the information which should be recorded includes the gross sales, employees’ wages, and any payments to independent contractors, acquisitions of property and equipment and leasing expenses. The information should be classified on a state by state basis. The aim of the classification is due to the differences in nexus in different states.
References
CCH TAX Editors, CCH Editorial Staff Publication. (2008). U. S. Master Multistate Corporate Tax Guide 2009. Chicago: CCH.
Bruce M. Nelson, J. T. (2008). Sales and Use Tax Answer Book, Book 2009. Chicago: CCH.
Mark E. Plotkin, B. W. (2003). E-Commerce Law & Business, Volume 1. Aspen: Aspen Pub.
