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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 11819
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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I am a 1099 contractor for a promotional company who has

Customer Question

I am a 1099 contractor for a promotional company who has built up a good amount of clients in Massachusetts where I live. I want to start an internet based promotional products and consulting business. I live in Massachusetts so it is my understanding that my customers will have to pay sales tax on the items they purchase from me. I would like to know if I can set up my business (DBA and tax ID) in neighboring New Hamphire, which is 15 minutes up the road and avoid charging my already existing customers sales tax either by getting a physical or virtual office in New Hamshire?
JA: The accountant will know how to help. Is there anything else the accountant should be aware of?
Customer: I haven't set up my business yet. I want to set up my business in New Hampshire. I live in Massachusetts and my clients are in Massachusetts. I don't want to charge them state taxes and I can't afford to cover the cost for my customers.
Submitted: 7 months ago.
Category: Tax
Expert:  Lane replied 7 months ago.

Hi. My name's Lane. I can help explain this.

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The primary rule for sales tax has to do with something called Nexus. ( ... and it's inclusive rather than exclusive)

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What that means is that you can have nexus in more than one place,

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The rule: You must collect and pay-in sale tax when you sell to residents of a state where you have nexus.

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Each state, in it's tax code, defines nexus (also known as sufficient physical presence). But generally, you have nexus when you have some sort of presence in that state.

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So, so sorry, unless you pick up and move to New Hampshire COMPLETELY, MA will argue that you have nexus in MA.

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Massachusetts considers a seller to have sales tax nexus in the commonwealth if you have any of the following in the state:

  • An office, place of business, or any owned property
  • An employee present in the commonwealth for more than 2 days per year
  • Goods in a warehouse
  • Ownership of real or personal property
  • A sample or display area, such as a trade show exhibit
  • Delivery of property or performance of service in Massachusetts

You can click here to read exactly what the Massachusetts Department of Revenue (Massachusetts’s taxing authority) has to say about what constitutes sales tax nexus in Massachusetts