Nevada LLC / Nexus to other states


A

azdevilcat

Last year, I formed a Nevada LLC with my wife as the only
other member. I am attempting to start a internet business
which will sell clothing from a website. I live in
Virginia, and listed the address on all of the Nevada LLC
forms as a Virginia Post Office Box I opened under the
business name.

I pay a designer on a work for hire basis, and this person
lives in New Jersey. The clothing will be made in New
Jersey, and then shipped to a fulfillment center in Ohio
(the fulfillment company charges and collects sales tax for
Ohio orders).

Questions:

1. I assume I will have to charge sales tax in New Jersey,
but is this based on the designer living there, or the
company that makes the clothes being located there? I am
unclear about this issue since the designer is not an
employee of my LLC, and the business that makes my clothing
makes clothes for numerous other companies.

2. Am I "doing business" in the state of Virginia? I do
live in the state and have a P.O. Box for the business, but
since the company will sell things over the internet, I
don't have any physical office location. I haven't yet
filled out the Virginia paperwork for a foreign company
doing business in Virginia, not knowing if this will be
required or not. I am somewhat concerned with the fact that
the Virginia foreign business form requires a Business
location (address) listing for Virginia, and says not to put
a Post Office box. However, I don't want to put my home
address on any paperwork. Do I have a choice?

3. Obvious question, but since I formed the LLC in Nevada,
am I doing business in the state? I don't have any presence
there other than the LLC formation.

Thanks in advance for your time. For what it's worth, I am
going to get legal advice before the business starts, but I
wanted to try and get a head start.
 
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P

Paul A Thomas

azdevilcat said:
Last year, I formed a Nevada LLC with my wife as the only
other member. I am attempting to start a internet business
which will sell clothing from a website. I live in
Virginia, and listed the address on all of the Nevada LLC
forms as a Virginia Post Office Box I opened under the
business name.

I pay a designer on a work for hire basis, and this person
lives in New Jersey. The clothing will be made in New
Jersey, and then shipped to a fulfillment center in Ohio
(the fulfillment company charges and collects sales tax for
Ohio orders).

Questions:

1. I assume I will have to charge sales tax in New Jersey,
but is this based on the designer living there, or the
company that makes the clothes being located there? I am
unclear about this issue since the designer is not an
employee of my LLC, and the business that makes my clothing
makes clothes for numerous other companies.

2. Am I "doing business" in the state of Virginia? I do
live in the state and have a P.O. Box for the business, but
since the company will sell things over the internet, I
don't have any physical office location.
You work somewhere, and that is more than likely Virginia
(in which case VA sales tax needs to be charged to your
customers).
I haven't yet filled out the Virginia paperwork
for a foreign company doing business in Virginia,
not knowing if this will be required or not.
It is.
I am somewhat concerned with the fact that
the Virginia foreign business form requires a Business
location (address) listing for Virginia, and says not to put
a Post Office box. However, I don't want to put my home
address on any paperwork. Do I have a choice?
Nope, you don't. The reason is, they want to be able to
come knock on your door and speak to you personally, so a
physical street address is required.
3. Obvious question, but since I formed the LLC in Nevada,
am I doing business in the state? I don't have any presence
there other than the LLC formation.
In Nevada? State law would prevail, but I doubt you'd have
Nevada nexus for sales tax.
Thanks in advance for your time. For what it's worth, I am
going to get legal advice before the business starts, but I
wanted to try and get a head start.
You're probably on the wrong end of getting legal advice,
which should have been done ~before~ incorporating in Nevada
(as it's just another state to file papers with and send
checks to).
 
F

Frederick Jorden

azdevilcat said:
Last year, I formed a Nevada LLC with my wife as the only
other member. I am attempting to start a internet business
which will sell clothing from a website. I live in
Virginia, and listed the address on all of the Nevada LLC
forms as a Virginia Post Office Box I opened under the
business name.

I pay a designer on a work for hire basis, and this person
lives in New Jersey. The clothing will be made in New
Jersey, and then shipped to a fulfillment center in Ohio
(the fulfillment company charges and collects sales tax for
Ohio orders).

Questions:

1. I assume I will have to charge sales tax in New Jersey,
but is this based on the designer living there, or the
company that makes the clothes being located there? I am
unclear about this issue since the designer is not an
employee of my LLC, and the business that makes my clothing
makes clothes for numerous other companies.

2. Am I "doing business" in the state of Virginia? I do
live in the state and have a P.O. Box for the business, but
since the company will sell things over the internet, I
don't have any physical office location. I haven't yet
filled out the Virginia paperwork for a foreign company
doing business in Virginia, not knowing if this will be
required or not. I am somewhat concerned with the fact that
the Virginia foreign business form requires a Business
location (address) listing for Virginia, and says not to put
a Post Office box. However, I don't want to put my home
address on any paperwork. Do I have a choice?

3. Obvious question, but since I formed the LLC in Nevada,
am I doing business in the state? I don't have any presence
there other than the LLC formation.

Thanks in advance for your time. For what it's worth, I am
going to get legal advice before the business starts, but I
wanted to try and get a head start.
In my opinion your businesses has a nexus in Virginia
because you are direction and managing it from Virginia. You
will have to list your home address on your R-1 registration
statement. You are responsible for collecting VA sales tax
for sales to VA Residents. Additionally you need to apply
for a business license at your local city or county, local
zoning may be a problem. Just why did you form a Nevada LLC?
 
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K

Katie Jaques

Last year, I formed a Nevada LLC with my wife as the only
other member. I am attempting to start a internet business
which will sell clothing from a website. I live in
Virginia, and listed the address on all of the Nevada LLC
forms as a Virginia Post Office Box I opened under the
business name.

I pay a designer on a work for hire basis, and this person
lives in New Jersey. The clothing will be made in New
Jersey, and then shipped to a fulfillment center in Ohio
(the fulfillment company charges and collects sales tax for
Ohio orders).

Questions:

1. I assume I will have to charge sales tax in New Jersey,
but is this based on the designer living there, or the
company that makes the clothes being located there? I am
unclear about this issue since the designer is not an
employee of my LLC, and the business that makes my clothing
makes clothes for numerous other companies.
The issue here is not the activities of the designer or the
manufacturer, but the LLC's ownership of property located in
the state. If you can arrange your contracts with the
designer and manufacturer so that THEY own all the physical
property, and title to it doesn't transfer to you until it
is sold to a third party, then the LLC probably does not
have nexus in NJ.

An independent contractor soliciting sales of your products
in NJ would give you sales/use tax nexus. But independent
contractors performing other kinds of services generally do
not create nexus. (Warranty services, installation, etc. can
be exceptions.)

Some states would exempt sales shipped to customers in the
state by an in-state fulfillment house on behalf of an
out-of-state seller. That's to prevent the fulfillment
industry from moving out of state. I'm not sure about Ohio.
The LLC will have nexus with Ohio if it owns the inventory
that is sitting at the fulfillment house, unless Ohio has a
special rule exempting it. So you and any other members of
the LLC will be Ohio income taxpayers.
2. Am I "doing business" in the state of Virginia? I do
live in the state and have a P.O. Box for the business, but
since the company will sell things over the internet, I
don't have any physical office location. I haven't yet
filled out the Virginia paperwork for a foreign company
doing business in Virginia, not knowing if this will be
required or not. I am somewhat concerned with the fact that
the Virginia foreign business form requires a Business
location (address) listing for Virginia, and says not to put
a Post Office box. However, I don't want to put my home
address on any paperwork. Do I have a choice?
I don't think you have a choice. Presumably you are
performing services for your LLC at your home in Virginia.
It doesn't sound like you are going anywhere else to do it.
Therefore, the LLC is doing business in Virginia.

You will probably have to be registered as a seller in VA
and the fulfillment house should collect use tax on sales
shipped to VA.

Check with the VA DOR.
3. Obvious question, but since I formed the LLC in Nevada,
am I doing business in the state? I don't have any presence
there other than the LLC formation.
No, you are not doing business in NV. In fact, I don't know
of any good reason why you should have formed your LLC
there. It doesn't change anything from an income tax
perspective. I'm sure it does result in some compliance
requirements such as the filing of an annual report of some
kind with NV. All of your distributive share of income from
the LLC will be subject to VA individual income tax, since
you are a VA resident. If you also owe tax to Ohio, VA will
give you credit for the income tax you pay there.

Katie in San Diego

The foregoing is intended for educational purposes only and
does not constitute legal or professional advice.
 

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