Contractor Creates a Nexus

Do Contractors Create a Sales Tax Nexus?

“Do contractors create a nexus?”

If your business requires contractors that get paid on a 1099 to work for you in another state, then you might have created a sales tax nexus.

When Contractors Create a Sales Tax Nexus

Contractor participation in building or creating new markets
If the contract worker takes part in helping you build and/or create a new market, then you most likely have a sales tax nexus.

Contractors generating sales or taking orders
If you have contractors for the purposes of:
• Generating sales
• Deliveries
• Taking orders for personal tangible property or services

Then they are required to register and collect sales tax.

Installation, servicing, or repairs
Installing, servicing, or repairing personal tangible property in the state can also create a substantial nexus.

State-Specific Considerations

Depending on the state, you have to look into:
• Local rules
• Court decisions

These can influence whether your activity results in a sales tax nexus.

Questions?

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Frequently Asked Questions

When does a contractor create a sales tax nexus?

A contractor creates a sales tax nexus when their activities in a state help establish or expand a market for your business, especially if they generate sales, take orders, or handle deliveries.

Do 1099 contractors count toward sales tax nexus?

Yes, if 1099 contractors are performing business-generating activities such as selling, delivering, or installing goods in another state, that may trigger a nexus obligation for your business.

What types of contractor activities trigger nexus?

Common triggers include generating sales, delivering products, taking orders, installing equipment, providing repairs, or servicing tangible property in another state.

Are all contractor activities considered nexus-creating?

No, not all activities automatically create nexus. It depends on the nature of the work and the state’s specific laws. Activities related to marketing and sales are the most likely to trigger it.

How do state laws affect sales tax nexus with contractors?

Each state has its own rules and court decisions that determine whether contractor activity creates nexus. It’s important to review local regulations or consult a tax professional for clarification.