The Growing Importance Of Economic Nexus - Passport Daily

The Growing Importance Of Economic Nexus

The Growing Importance Of Economic Nexus

Digitalization, the corona pandemic, and globalization are factors that influence the growth of e-commerce. Amazon, eBay, and other online sale platforms are becoming bigger and bigger. The demand is rising continuously. The competition is immense. 

The majority of people have to stay home in lockdown right now. They have a lot of time, they surf online and want to buy new products that help them to make the time pass. People are shopping for new clothes, a lot of DIY products to be creative at home. They don´t want to spend much money on those products and check out the cheapest one. 

The range and choice of products are huge. From high to low prices and from high to low quality- you can find everything from everywhere like China, Bangladesh, European countries, or the US. 

The world is connected

We can easily get from one continent to another in a short period. We are even more connected through the internet. It is called the world wide web for a reason! Information can be shared with millions of people with a simple clock on social media. We can check out the online shop from a company which is located on the other side of the world. We can order the products and will receive them after a view day. It seems kind of magical! So easy, advanced, and fast.

Running a global company

Many businesses want to go international because they dream of big success abroad. The demand for certain products is high in certain countries. The production is cheaper in certain countries. The laws and regulations are easier in certain companies. 

People try to work on a high optimum with the lowest expenses of time and money because the completion is high. The fact that companies are running globally makes the competition growing even more. 

Running an international business is complex. There are many things that have to be considered, prepared, and managed. Local businesses already have a lot of paperwork but including the international law takes the company to the next level of challenge. 

Some aspects have to be cleared between the countries. The laws of businesses are different, the marketing and demand might differ and the taxation is regulated distinctly.

Nexus sales tax

One of the big aspects of a company is always taxation. It is a complex system of requirements and conditions that defines how much sales tax a company has to collect for the government. The nexus is the connection between a company and the state that defines if a company collects and pays sales taxes for sold products & services or not. 

The details about sales tax audits are important for every business to always be on the legal side of the taxation law. 

Economic nexus

Economic nexus is the term that includes all the previously mentioned international online businesses. Usually, a company has to pay taxes when they have a physical location in the country. As the online business is growing the economic nexus is necessary because it includes the fact of lack of a location and still allows a state to collect sales tax from a company.

Posted in Tax