What is Nexus?

Nexus means Connection. Nexus is established by having a business presence in a state or locality. Nexus could be created by having one of the following in the area:

• store

• office, factory

• an employee who works from home

• an employee making a sale or performing a service call.

If nexus is created this can impact payroll withholding taxes. In some cases, the employer becomes subject to the withholding laws of that state or locality. This can affect whether an employer is required to withhold taxes for an employee’s state or locality of residence even though they perform no services there.

TIP:

Individual local and state tax rules vary. We recommend consulting with the appropriate tax authorities for compliance rules on whether you're required to withhold.

How Does Namely Support Nexus?

Namely Payroll will not automatically apply nexus. It is best practice to review each employee's tax setup and determine if an employee lives or works in a state or locality where you have not had a physical business location. If they do, you should consult the appropriate tax authorities to find out if you need to participate in withholding. In some cases, you may want to perform a Courtesy Withholding. For more information, please read our article What is Courtesy Withholding for Payroll Taxes?