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> The most frustrating part is that in theory every state expects a business to file as a foreign company if you are "doing business" in that state, which by th

by koolba 6y ago

> The most frustrating part is that in theory every state expects a business to file as a foreign company if you are "doing business" in that state, which by their definition usually includes selling your product to anyone living in the state, even if the sale is done online. However, I personally don't know of any small startups that actually do this, and accounting costs of filing that many state tax returns would be absurd. That’s not how it works at all. You pay taxes based on where you have a nexus, such as an office. Having customers in other States does not mandate you pay corporate tax for their States. That would violate the interstate commerce clause. It’s even more of a stretch than trying to claim sales tax from out of State merchants.

zaroth 6y ago
I’d be very interested in reading a legal opinion on this specific topic. For example here’s one article discussing just CA for several pages [1] which includes a provision where you have to file if you have sales in-state in excess of $500,000 or 25% of your total sales, or paid compensation in excess of $50,000. It’s frankly an absurd situation even if you just wanted to figure out for yourself where you should file and how much you would have to pay. Paying someone to “do it right” nationwide would probably be a six-figure proposition. This is why, mostly, it isn’t actually ever done until you get past a certain size — maybe by 8 figures of revenue you consider possibly maybe dealing with it. Presumably the same laws apply even to international corporations “doing business in CA”, not just domestic US companies. [1] - https://sdcorporatelaw.com/business-newsletter/when-to-register-a-foreign-business-in-california/ https://sdcorporatelaw.com/business-newsletter/when-to-regis...
FrobeniusTwist 6y ago
> You pay taxes based on where you have a nexus, such as an office. That's true as far as it goes, but the requirements for "nexus" were significantly weakened a few years back by South Dakota v. Wayfair. It is no longer a constitutional requirement that a company have a physical presence in a state in order for there to be nexus. Having a sufficient number of customers in a state can definitely subject you to taxation by the state.

by koolba 6y ago

zaroth 6y ago

I’d be very interested in reading a legal opinion on this specific topic. For example here’s one article discussing just CA for several pages [1] which includes a provision where you have to file if you have sales in-state in excess of $500,000 or 25% of your total sales, or paid compensation in excess of $50,000. It’s frankly an absurd situation even if you just wanted to figure out for yourself where you should file and how much you would have to pay. Paying someone to “do it right” nationwide would probably be a six-figure proposition. This is why, mostly, it isn’t actually ever done until you get past a certain size — maybe by 8 figures of revenue you consider possibly maybe dealing with it. Presumably the same laws apply even to international corporations “doing business in CA”, not just domestic US companies. [1] - https://sdcorporatelaw.com/business-newsletter/when-to-register-a-foreign-business-in-california/ https://sdcorporatelaw.com/business-newsletter/when-to-regis...

FrobeniusTwist 6y ago

> You pay taxes based on where you have a nexus, such as an office. That's true as far as it goes, but the requirements for "nexus" were significantly weakened a few years back by South Dakota v. Wayfair. It is no longer a constitutional requirement that a company have a physical presence in a state in order for there to be nexus. Having a sufficient number of customers in a state can definitely subject you to taxation by the state.