The new withholding guidelines are applicable when an employer has sufficient New York nexus.Nexus: "A seller's minimum level of physical presence within a state that permits the taxing authority to require the seller to register, collect and remit sales/use tax and comply with the Country's, Province's, State's and/or County's taxing statutes and regulations."
Sunday, May 01, 2005
Things That Make Me Say Huh?
Today's TaxProfBlog said:
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3 comments:
You've probably come across the concept before that US states are sovereign in many ways. One of these is taxation. (Federal taxation was only introduced by a constitutional amendment in 1913).
But this sovereignty does not apply to interstate commerce---that's the responsibility of the federal government.
As an example, a company in Maine that ships to me in New York (out-of-state) does not have to charge me Maine's sales tax because _I_ am not in Maine. Nor does it have to charge me New York sales tax, because _it_ is not in New York. As a result, I get my product tax-free. Arranging tax-free sales in this manner is a popular sport in The US.
But there is a wrinkle. If the Maine company has, say, a warehouse in New York State, then the state of New York can demand that it charge me New York sales tax and hand it over to the New York taxation authrities. That warehouse creates nexus.
Thank you, Mystery Poster! That was a great explanation. Seriously.
I should have added that the TaxProf was referring to withholding taxes (I think they're called pay-as-you-go taxes in Britain).
The principle is the same. If I am a New York resident working for an out-of-state employer, the state of New York has no way of enforcing the collection of withholding taxes unless it can establish nexus.
In this case, though, the state of New York will come after me if I don't pay estimated taxes myself.
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