We all know that there will always be one surefire aspect to business – and that’s taxes. But the question then is: are you sure, wherever you operate as a business, that you know your tax liability? It can be a messy matter, especially if you’re an international business operating in the US. And that’s what we’ll be talking about here – this guide is specifically tailored to help foreign businesses understand the essential steps involved in calculating sales tax in the US.

Navigating the US tax system can be particularly challenging for international businesses. The US has a complex and varied approach to sales tax, which differs significantly from the VAT systems common in many other countries. For foreign companies, understanding these nuances is essential to ensure compliance, avoid penalties, and accurately calculate sales tax liabilities. So, whether you’re selling products or services in all, many, or a few states, determining the correct amount of sales tax to collect and remit will ensure you stay on the right side of tax authorities, and compliant as an international business in the US.

Understanding Sales Tax Rates – Explore the variability of sales tax rates across US states and localities with examples.
Finding the Correct Sales Tax Rate – Learn how to determine the correct sales tax rate by identifying the sale location and checking state and local rates.
The Sales Tax Calculation Formula – Discover the formula for calculating sales tax and see a practical example applied step-by-step.
Calculating Sales Price with Tax – Understand the methodology for determining a sales price that includes tax, with a detailed example.
Backward Sales Tax Calculation – Learn how to calculate the pre-tax sales price from a total price that includes sales tax.
State and Local Sales Tax Rates, 2024 – Get a breakdown of state and local tax rates for the year 2024.
Using Sales Tax Calculators – Find out how to leverage automated sales tax calculators for accuracy and compliance, with recommended tools and steps.

1. Understanding Sales Tax Rates

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If you are tasked with the great responsibility of leading a tax team, it is important to remember your team will feed off the energy that emanates from the top. When you are leading an organization, those under you will feel your energy and attitude towards your team. You can manage a team by staying in your office or you can manage your team by engaging with them frequently in positive interactions. This article provides three ideas to successfully manage, motivate and inspire your tax team members to higher levels of production and success. There was an experience learned early on in developing my management skills that taught me a valuable lesson in motivating our team. Someone who reported to me early on in my career told me how much they appreciated the inspirational quotes I sent out to staff during the week. It was only during a review process that I learned how impactful the inspiration and motivational quotes sent to my team members contributed to their positive attitude and overall success. During an annual review, one individual expressed in writing how much they appreciated the inspirational quotes I would send out in team communications. They communicated to me in writing how they were struggling privately with a deeply personal situation. This person told me they looked forward to the inspirational quotes I would often send out to team members. They said the quotes I sent them got them through some of their most challenging days. Another person on my team shared that by sending them the motivational quotes, it made them feel I was thinking about them in a positive way.

This experience taught me a valuable lesson about managing people. We often are unaware of what is happening in the lives of those we manage. Little did I know at the time, small acts of kindness like sending an inspirational quote to a team member would have such an impact on their mindset. The impact of these small motivational quotes communicated in writing was stronger than I ever imagined. It was a lesson I was fortunate to learn early in managing people. You must consistently feed your people positive energy to get positive results.
You are most welcome to download a complimentary copy of our 300+ Inspirational Quotes eBook: https://www.taxconnections.com/motivational-inspirations.
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Anyone in the real estate business is aware of the powerful, impactful and flexible Opportunity Zone (OZ) Program which became effective Jan. 1, 2018 as part of the Trump Administration’s bi-partisan Tax Cuts and Jobs Act (2017 Tax Act). However, developers are generally required to modify their traditional game plan of contributing property, receiving equity as “carried interest” in the partnership and navigating the related-party and self-constructed asset rules in order to comply with some of the unique structuring requirements under Internal Revenue Code (IRC) Section 1400Z and related Regulations which control the OZ Program.

The OZ program currently allows up to a current five-year federal (and in all states other than CA, MS, NC, NY and MA) tax deferral on virtually any U.S. short-term or long-term capital gain, other than gains generated on related-party transactions (20% common ownership). For gains invested into a Qualified Opportunity Fund (QOF) by Dec. 31, 2021, the OZ program allows the taxpayer to increase their tax basis in the QOF by 10% after holding the QOF interest for 5 years. Provided the taxpayer has held the QOF for the required five-year holding period on the earlier of: i) Dec. 31, 2026 or ii) the disposition date of the QOF interest the taxpayer only reports 90% of the deferred tax gain. For example, a taxpayer deferring a $1 million gain will report $900,000 on Dec. 31, 2026 (or on an earlier disposition or “Inclusion Event” date).

The real impactful benefit from the OZ program comes in the form of complete tax exemption on any post-reinvestment appreciation in the OZ investment(s) after holding the QOF for at least ten years. While seldom factored into projected investment returns, all depreciation and credits claimed on OZ projects are also exempted from recapture after meeting the 10-year hold threshold – an incredible tax benefit for OZ investors.
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1. Do not leave the most important professional decision you make in building your tax team to chance. The chance the best tax candidate will respond to your online tax job ad is not optimal this way. The truth is it requires an expert to go out and actively recruit the most talented tax professionals and invite them to speak with you privately.

2. Experienced tax recruiters understand corporate clients are very busy and value discretion and confidentiality on a tax executive search.

3. Our level of understanding of tax executive searches, our one-on-one interviewing and screening skills ensure more successful, long-term matches on a tax search. Our personalized approach enables us to be more discerning, and not based on superficial characteristics you will encounter during a few interviews.

4. Interviewing correctly is a time-consuming process. Working with us saves you time since we thoroughly pre-screen and vet personalities to find tax professionals who align with your preferences and values.

5. Relying on online resumes submitted through public resume portals increases the risk of unpleasant personality surprises and poor worth ethic. An experienced tax recruiters’ responsibility is to screen out incompatible candidates and report their findings to clients.
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The Nebraska sales tax exemption for manufacturers applies to businesses that are involved in fabricating, assembling, processing, refinishing, or refining activities. In addition to performing any of these necessary activities, 50% or more of the manufacturer’s revenue must be generated from the sale of products resulting from these activities. Any machinery and equipment the manufacturer intends to claim must also be used 50% or more of the time performing a “manufacturing” task. However, the machinery and equipment does not have to come into direct physical contact with the tangible personal property being produced for sale in order to be considered manufacturing machinery or equipment. If the machinery and equipment meet all these requirements, then the Nebraska sales tax exemption for manufacturers will apply.

In Nebraska, manufacturing means an “action, or series of actions, performed upon tangible personal property, either by hand or machine, which results in that tangible personal property being reduced or transformed into a different state, quality, form, property, or thing.” Manufacturing requires a physical change to the tangible personal property within the process and does not simply require an increase in the value of a product without a physical change to the item in question. See both Neb. Rev. Stat. Sec. 77-2701.47 and Neb. Admin. R. & Regs. Sec. 1-107.

When Does Manufacturing Begin and End in Nebraska?

The Nebraska sales tax exemption for manufacturers covers items that are used within the manufacturing process and excludes items that are used before manufacturing commences or post manufacturing. Based on the definition provided by the Nebraska Department of Revenue, manufacturing begins with “the storage of raw materials” and manufacturing ends “after finished goods are transported to a warehouse for storage.” For example, machinery and equipment involved in the receiving of raw materials or the removal of finished goods from storage for customer delivery are not considered part of the manufacturing process and fall outside the purview of this exemption.
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The June 2018 U.S. Supreme Court ruling in South Dakota v. Wayfair, Inc. reshaped the landscape of sales tax obligations across the United States, ushering in the era of economic nexus. This landmark decision overturned the previous requirement of physical presence for establishing nexus, opening the door for states to enact economic nexus legislation. Alongside this shift, a new focus on the concept of trailing nexus emerged, presenting a continuation of tax obligations even after a business no longer meets the nexus criteria.

In this article, we’ll define economic nexus and trailing nexus, and how the two may dictate your tax obligations regarding the states in which you operate. Here’s what we’ll cover:

Understanding Economic Nexus and Thresholds: Discusses economic nexus thresholds and varying state regulations.
What Is Trailing Nexus? Defines trailing nexus.
Examples of Trailing Nexus Policies: Explores examples of trailing nexus policies by state.
Practical Considerations for Businesses: Discusses tips on how to handle trailing nexus in your state.
Not what you’re looking for? Let’s talk. Reach out to us at in**@******************up.com.

1. Understanding Economic Nexus and Thresholds
Economic nexus, as per the nexus definition, refers to the connection between a business and a state based on economic activity rather than physical presence. Each state sets its own threshold for economic nexus, determining when a business is required to collect and remit sales tax. For instance, in Arkansas, the nexus law sets the threshold at $100,000 in sales or 200 separate transactions, whereas in California, it’s $500,000. These thresholds vary significantly from state to state, adding complexity to sales tax compliance for businesses operating across multiple jurisdictions.
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The R&D tax credit is a governmental incentive designed to encourage research and development activities in the US. This credit offers a dollar-for-dollar reduction on federal taxes for qualified expenses related to developing new or improved products, processes, software, technique, formula, or invention.

Although claiming this credit can offer considerable benefits for companies engaged in Research and Development efforts, the process is not without its challenges. Three Common Challenges You May Face while Claiming R&D Tax Credits:

Documentation of Qualified Activities and Expenses

Insufficient documentation is a common challenge with the R&D tax credit. Accurately identifying what constitutes a qualifying R&D activity and having the proper support can be challenging for taxpayers. It is important that the taxpayer implements a system for maintaining records and documentation. While R&D activities must meet specific criteria related to developing new or improved products, processes, or software, having a robust record keeping process is important

Companies must keep track of their activities and expenses and make sure they are tied to the qualifying activities while adhering to IRS regulations
Updates to R&D Tax Credit Law

The R&D Tax Code is complex, and lack of awareness and understanding is a common challenge for the taxpayer. Staying informed of any updates in tax legislation is crucial. Being up to date ensures an understanding of how changes to the code might affect your company’s qualifying R&D activities

To overcome the challenge of ever-changing tax laws, taxpayers should engage experts who specialize in R&D tax credits.

Staying Compliant and Audit Ready
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Tax compliance significantly affects your business’s financial health and customer relationships. Understanding the taxability of your products or services is essential for smooth business operations. Here’s why accurately determining the taxability of your offerings is vital to your business’s success.

Legal Compliance and Avoidance of Penalties
Adhering to Regulations: Each state and country has specific tax laws that dictate which products and services are taxable. Failure to comply with these laws can result in significant penalties, fines, and interest on unpaid taxes. By determining the taxability of your offerings, you ensure that your business complies with all applicable tax regulations.
Avoiding Legal Disputes: Incorrectly charging or failing to charge sales tax can lead to legal disputes with tax authorities. These disputes can be time-consuming and costly and have the potential to harm your business’s reputation and operations. Properly determining taxability helps avoid these legal complications.

Financial Health and Cash Flow Management
Accurate Pricing: Understanding the taxability of your products or services allows you to set accurate prices that include the appropriate tax amounts. This ensures that your pricing strategy is transparent and aligns with your financial goals.

Preventing Unplanned Expenses: If you fail to collect the correct sales tax amount from customers, your business may have to cover the shortfall. This can lead to unexpected expenses and a negative impact on your cash flow. Proper taxability determination helps you collect the right amount upfront, avoiding financial surprises.
Customer Relations and Trust

Transparency with Customers: Customers expect pricing transparency, including applicable taxes. Accurately determining and displaying tax amounts builds trust with your customers, as they can see that your business is honest and compliant with tax laws.
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In the evolving landscape of state taxation, companies must navigate the complexities of sales and use tax nexus. With the surge of e-commerce and remote work, a comprehensive understanding of both economic and physical nexus becomes a powerful tool to ensure compliance and streamlined business operations.

What Is Nexus?

In the context of state taxation, Nexus refers to the connection or link between a business and a state that justifies the state’s authority to impose tax obligations on the business. Traditionally, this connection was based on a physical presence, but the advent of digital commerce has led to the adoption of economic nexus standards by many states.

Physical Sales and Use Tax Nexus

Physical nexus is established when a business has a tangible presence in a state. This can include:

Office Locations: Having an office or any other place of business in the state.
Employees: Employing workers who reside or work in the state.
Inventory and Warehousing: Storing inventory or goods in a warehouse located in the state.
Property: Owning or leasing property in the state, including real estate and tangible personal property.
Sales Representatives: Having sales representatives, agents, or contractors operating in the state.
Physical presence has traditionally been the primary criterion for establishing nexus, ensuring that businesses with a substantial and tangible connection to a state contribute to its tax base.

Economic Sales and Use Tax Nexus

In the digital age, economic nexus has emerged as a pivotal concept in state taxation. It is based on the economic activity a business conducts within a state, regardless of physical presence. This concept gained prominence following the landmark 2018 Supreme Court decision in South Dakota v. Wayfair, Inc., which upheld the state’s right to impose sales tax obligations on out-of-state sellers based on economic thresholds, marking a significant shift in state taxation practices.
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