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state income tax

Level 2

I have a business client operating in Florida that in 2019 had roughly $150k in sales to out-of-state from their website.  There were 2 states, NJ & Virginia that my client has met the transaction volume threshold to report sales taxes. 

I was wondering if my client is required to file business income tax returns at the state level (for those 2 states) from 2019 amounts related to their website sales ?  If so, how do I report expenses associated with the sales on those 2 state income tax returns ? I really appreciate your response.

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2 Replies 2
Level 15

. Look up the income tax nexus rules for NJ and VA. They may or may not be the same as the sales tax rules.

If you do have to file in NJ and VA, the net business income will be apportioned based on sales, and possibly payroll and property.


ex-AllStar
Level 2

Thank you very much for your response.  I have not yet called NJ or VA tax authorities, but I got this opinion from 

https://blog.taxjar.com/income-tax-nexus/

What do you think ?

"Prior to 1959, the nexus rule for income tax was pretty much the same as for sales tax. That is, any type of physical activity or connection with a state could allow that state to require the taxpayer to file an income tax return and to pay income tax bases on some allocation of income to the state. The burden of this became so severe that Congress passed legislation establishing when a state could impose its ‘income tax’ on nonresident companies and their owners. This law is commonly referred to as Public Law 86-272 (P.L. 86-272). This federal provision is still the law and allows companies to perform the following activities in a state without creating income tax nexus:

  • Solicit sales of tangible personal property (directly or indirectly)
  • Provide services that are ancillary to the sales of property
  • Have samples for display in the state and have other property used for sale in the state (cars, computers, etc.)
  • Orders are accepted and fulfilled outside of the state

Activities that exceed these “safe harbor” activities will create income tax nexus in the state. The following are examples of activities that will create income tax nexus:

  • Selling services and not personal property,
  • Providing services in the state,
  • Accepting orders in the state,
  • Delivery of property into the state on company vehicles,
  • Accepting deposits in the state,
  • Repossessing property in the state, or
  • Having inventory in the state."
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