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Lev
Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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We are a new Delaware LLC but the two partners are located

Resolved Question:

We are a new Delaware LLC but the two partners are located in New York and California but in all other ways are a virtual company. While we were a New York LLC we were charging sales tax for advertising services for those customers based in New York State. As a Delaware LLC will we still need to do that? What about California customers? (we are now 50/50 NYC and California partners, used to be just New York sole prop).
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.

LEV :

Hi and welcome to Just Answer!
Even you consider the LLC as a virtual company - still you run the LLC from physical place or places.
Based on locations of these places - the LLC would be under jurisdiction of these states.
Thus - if you run the LLC from your NY location - the LLC has a nexus in NY and is responsible to collect sales taxes from NY customers.
Correspondingly - if the LLC operations are run by the partner living in California - the California tax law and regulations would be in effect - and the LLC is required to collect CA sales taxes from sales to California customers.

Customer:

The company is run by the partners in both California and New York both are involved in the day to day operations of the company so it sounds like going forward we would need to collect sales tax in both states. Previously the company was a single member llc in New York so I think we were on the right side of sales tax collection just collecting in New York.

LEV :

The company is run by the partners in both California and New York both are involved in the day to day operations of the company so it sounds like going forward we would need to collect sales tax in both states.
That is correct - if partners run business operation from locations in both California and New York - that means - the LLC has a nexus in both states and should obey both states tax laws.
Previously the company was a single member llc in New York so I think we were on the right side of sales tax collection just collecting in New York.
That is also correct - because previously all business activities were physically performed from NY - only NY tax laws were applied.


Customer:

Great thanks! We were 99% sure that was the case thanks for your confirmation.

LEV :

State income tax liabilities are based on in which states the business has a nexus. The nexus in simple terms means physical presence.

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22633
Experience: Taxes, Immigration, Labor Relations
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