What Gives You Nexus in Maryland?
- Sales Tax
- July 18, 2016 | Tim Parker
Trying to figure out if you owe taxes in a certain state?
It would be nice if the laws were standardized but unfortunately, that’s far from the case. Each state has different laws on what establishes nexus and that makes it difficult for the business owner to navigate.
What defines nexus in the state of Maryland? You can find that information in Administrative Release #2. Maryland defines nine activities that will establish nexus in the state.
1. Physical presence
If you have any type of office in the state, you have nexus. It doesn’t matter if you rent space, work in a co-working environment, or work out a home office as defined by the IRS. This kind of physical presence always creates nexus.
2. You own property
Property isn’t just defined as real estate. It could be manufacturing equipment or anything else used to manufacture or distribute your product, including vehicles.
But on the real estate side, this could include but is not limited to a repair shop, parts department, purchasing office, employment office, warehouse, terminal, meeting place for directors or other personnel, sales office, permanent sample or display room, research facility, or a recreational facility for use of employees or customers.
3. Employees soliciting or accepting orders
Do you have a call center? How about somebody working at their computer all day in a customer service capacity who happens to live in the state? That will likely establish nexus.
4. Installation or assembly
Maybe you created something in your home state but brought it to Maryland to install for a customer. That, according to Maryland law, will put you on the hook for remitting taxes on any sales there.
5. Inventory in the state
Regardless of its size, if you have a warehouse or you’re storing goods in the state, that’s nexus. If a distributor or other party is holding your inventory in the state, again, that’s nexus.
6. Collections activities
Have some clients who haven’t paid? Or maybe you’re in the debt-collections business. If you have people in the state who are attempting to collect on delinquent accounts, that counts. Delinquency doesn’t even matter. If people on the ground in Maryland are collecting payments, your company established nexus.
7. Technical support
If it’s simple phone support for somebody that purchased a small product, you may not have established nexus but if you or your staff are offering detailed, ongoing technical support or training to users of your products, you’ve probably established nexus. The exact wording is “users of corporate products after the sale.” This seems to indicate a substantial, ongoing relationship.
8. Repair work
If personnel who work for you are in Maryland making repairs to products you supplied, you will have established nexus.
9. Mobile sales
Owners of mobile stores have nexus in Maryland. A prime example of this would be a food truck that drives around the state to festivals and fairs. If you earn revenue out a vehicle, that still counts as nexus.
Not That Simple
Of course, more complex business situations may not be as easy to figure out. For example, the Maryland Tax Court ruled that subsidiaries located outside of Maryland but wholly owned by a Maryland-based company may have nexus because of their connection to the Maryland-based company.
If you have any doubt, contact the Maryland Comptroller’s office for clarification.