Where do we pay taxes?

We’re a Minnesota based business who was hired by an org in D.C. to do a live event in Vermont, and were then paid by an organization out of Kansas. Where do we pay taxes?

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  1. 28 Answers

    Company is based in Minnesota, meaning it is a “domestic in the state of Minnesota organization”; therefore, the company will be taxed based on the Federal and State income tax regulations. Conducting interstate business whereby sales is conducted through an independent contractor in the state where the live event occurred does not mean that your business needs to pay state taxes in that “foreign” state. Your company would pay income taxes based on Minnesota state tax laws. Depending on the structure of event sales, who was authorized merchant, and the contract agreement your company may or may not have to pay taxes in Kansas. More details would be required.

    No two states tax the same on a specific service provided, in this case Amusement/Recreation. For sales tax on products and services sold, merchants are required to collect sales tax and pay to the state department of revenue especially of the service provided is sales-tax eligible per that state’s law. If the organization out of Kansas was the merchant, they would be responsible for the ticketing sales of the live event.

  2. 5 Answers
    This answer is edited.

    I will do my best to answer your question based on what you’ve included here, however there are several other questions I would need to ask in order to give you a more complete answer.

    First, we need to determine the type of business you have, its legal form. Are you incorporated in Minnesota? In most states, corporations are subject to corporate income tax, whereas other business types like S-Corporations, sole proprietorships and LLCs are “pass-through entities” and are taxed as part of the owner’s personal income tax return. So first, you’ll need to know the type of business you operate, as the tax implications vary by entity type.

    For example, in Minnesota, there are two important taxes that apply to various types of business entities. The first is a corporation income tax, which is defined as “corporation franchise tax” that applies to C-corporations. The second tax is called the minimum fee. This applies to not only traditional corporations, but to LLCs and partnerships, as well.

    Now let’s breakdown the multistate part of the question. It would be straightforward if all of your business was conducted in Minnesota; you would simply pay the taxes in Minnesota, but it’s not that simple (it never is!) When you begin to conduct business in states outside of your “home state”, you then get to explore the nexus laws.

    Nexus just means a significant presence. States want to know where their businesses are located, not just where their paperwork might have been filed! They are very interested in knowing where the business transactions are being conducted. Is it in their state, other states, or both?

    You’ll want to define your nexus. To help you determine this, you’ll want to answer these questions:

    • What state do you live in? Where is your business office located?
    • What state are you incorporated in (or filed articles of organization)?
    • Where do you conduct your business or fill orders?
    • What states do you pay virtual workers, consultants or employees?

      Even though each state has their own nexus laws, in general you can use a threshold that many states use. The threshold is either $100,000 in sales or 200 transactions in that state. So in your example, the transaction of the event in Vermont might not require you to establish nexus in Vermont for tax purposes, unless it was one really big event! As you can see, it isn’t just whether or not you did sales in a particular state, it also matters about other factors such as your physical presence, where your contractors and employees are located, etc.

      Your best option is to speak with a tax attorney that deals with multistate nexus and how to best determine it for your situation.

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