Theresa Arndt, CPA

“Nexus” determines whether your business must collect and remit sales tax in another state.   If you have nexus, you must collect.   Nexus is a Latin word meaning connection.    Sales tax nexus occurs when your business has some kind of connection to a state.   Until this connection is established a state cannot require you to register and collect sales taxes. So, what creates nexus?   The answer to that question changed last year in a historic landmark case when the Supreme Court in South Dakota v. Wayfair overturned a 1992 court case Quill v. North Dakota . If you’re not familiar with this case then you need to keep reading, because it will have a huge impact on business owners.    What was the South Dakota v. Wayfair case all about? Before the Wayfair decision in June 2018,  Quill  served as the precedent for sales tax nexus. Under  Quill , businesses had to have a physical presence (e.g., office, store, warehouse,...

A large number of small S corporations use the home office of one of the shareholders (or the sole shareholder) as their principal business office, which is used exclusively and regularly for corporation business. The costs related to this home office can be handled for tax purposes in a number of different ways, but generally the easiest method and the one that results in the most favorable tax treatment for the corporation/shareholder is for the corporation to reimburse the shareholder under an accountable expense reimbursement plan. Under this arrangement, the corporation will reimburse the shareholder for the home office costs on a monthly or other agreed upon basis. The amount the corporation pays is a deductible business expense, and, because the reimbursement is under an accountable plan, the reimbursement is not included in the taxable income of the shareholder. As an accountable expense reimbursement, the shareholder must keep track of the actual expenses of maintaining th...