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Multi-state company consolidating and closing entities. When we move employees and sales operations, will nexus change?

Full Question: Multi-state (all 50 states), multiple entity (19 - 18 are subsidiaries of 1 parent), company headquartered in Texas. Currently only 5 of the 19 entities sell product and have employees. Legal department is attempting to consolidate and close entities. Moving employees from all companies to parent, moving all sales to 3 subsidiary entities. All sales are via internet and phone. We have physical offices in several but not all states, mainly for medicare/medicaid filing purposes. Have employees/sales personnel in all states. When we move all the employees and sales operations, will nexus change? i.e. will we only have nexus in states in which we have physical presence for sales/use tax purposes or because all entities are subsidiary/parent will nexus remain the same?

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Answer:

Diane Yetter photoYour question is a bit complex and is not something we can definitively answer in this forum. We would be happy to work with you directly to determine your nexus profile. Here is some general nexus information that may help you however. Sales tax nexus is typically determined on a legal entity basis. Therefore if you currently have multiple subsidiaries it is likely each subsidiary determined its own nexus. If these will be merged into a smaller number of entities, then all the activities of any one entity will determine the nexus for the entire entity. However, a number of states have enacted new affiliate nexus rules that establish nexus for remote separate legal entities with common ownership of an entity operating in a similar line of business with a similar name. So, this could expand your nexus profile to states other than the states where a single entity may have nexus. Nexus is a very fact and circumstances based determination and has been seeing a great amount of change and enforcement in the states recently. If you need assistance evaluating the nexus of your operations, we do provide this as a consulting service and would be happy to discuss this with you further.

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