SALT Update: Determining Nexus if You are Doing Business in Pennsylvania

As resource-strapped states aggressively pursue tax revenue and are claiming nexus for a variety of business activities, state and local taxes (SALT) have become a significant cost of doing business. Budget cutbacks can mean that states may be more likely to scrutinize company tax returns. The surge in online marketing and hybrid employees has raised many questions about SALT compliance. Here’s what you need to know when it comes to determining nexus. 

How do you determine if you have nexus in any state?

Trying to stay abreast of each state’s unique tax laws can place a strain on business resources and result in unintentional non-compliance. Fischer Cunnane can provide a nexus study to determine if an organization has presence in Pennsylvania and in other states. The study provides value by determining if nexus has been established and then filing for associated tax obligations. And if it’s found that the company has neglected previous years’ obligations, we can quickly support necessary back-filing, with the intention of becoming compliant while avoiding penalties.

What are the three key factors to determine if you have Nexus in a state?

1. Physical Presence. Do you have property, such as an office, storefront, warehouse or active employees in the state?
2. Payroll Presence. In-state employees, including remote and hybrid employees can trigger nexus, resulting in tax obligations within the state.
3. Economic Presence: Companies that have economic activity within a state, with or without physical presence, may have nexus, which is often true for online sellers.

Pennsylvania has bright-line nexus, which establishes clear guidelines based on quantifiable business activity, with or without physical presence. According to PA Department of Revenue guidelines, companies that exceed $500,000 or more of gross receipts per year that are sourced to Pennsylvania have a filing requirement with the Commonwealth.

Nexus guidelines can result in questions for specific circumstances, and some cases can be successfully refuted. The takeaway is that nexus should be carefully investigated and determined to remain compliant and avoid complications and penalties down the road. A nexus study can provide clarity and peace of mind.

Rob Feenan is a Tax Shareholder at Fischer Cunnane and has more than 25 years of experience supporting clients with comprehensive tax planning with an emphasis on tax minimization. Reach Rob at rfeenan@fischercunnane.com