As their organizations grow and mature, business leaders expanding into new markets and areas of operation need to know their way around new market terrain.
National distribution of products involves multiple tax codes, regulations, and compliance standards.
In this post on Entrepreneur, contributor and entrepreneur Kari Warberg Block shares her advice on navigating new market terrain, based on her own experiences.
How to Safely Navigate New Market Terrain
Research Tax Nexus
Adding employees, contract staff, and property in another state from your current state of incorporation introduces tax nexus. Nexus is a measure used by state tax offices to determine whether out-of-state businesses are liable for sales tax.
“Nexus can apply when your company maintains any property, product, or people in another state,” notes Block.
Consult with your accountant and state revenue officials to determine whether nexus applies to your products or services.
“If you utilize an independent sales representative who signs a binding contract, you as an employer may be liable to Nexus burden in some states.”
Understand State Regulations and Fees
Regulations and fees can vary dramatically between states, so Block advises businesses do their research while planning any physical expansion or product distribution.
For example, many manufacturers are required to pay state-license fees for various products, while states like Minnesota and North Carolina asses fees based on percentage of sales or shipments within their borders.
“These fees can cost as much as eight percent of a company’s total sales volume, in addition to state license fees and regulatory consultant costs.”
Regulations and fees may not apply to your specific business, but Block says it is imperative that business leaders pull in the expertise of growth consultants and tax attorneys, and consult state regulatory bodies to make sure they are in compliance, before distributing nationally or opening new locations.
Business growth is a positive thing across the board for organizations of all size, but business leaders must carefully consider the financial implications of expansion across all cost centers.
Learning the Lowdown of HR Law
Hiring is always an exciting time for organizations, but adding staff in various states makes them subject to state unemployment and worker’s compensation taxes. Because employment rules vary state to state, it is imperative you understand how hiring impacts employment policies for vacation, sick leave, and paid holidays.
“The burden of proof falls on the employer if the employee feels they are entitled to compensation for working nights, weekends, and holidays. If your employees answer texts, tweets or Facebook messages after hours, time spent working must be documented and paid.”
Block notes she found business advisors with expertise in tax liability, risk management, and business operations invaluable as she expanded nationally.
If you are considering expanding into other states, or offering your products and services at a national level, do your research, and before you navigate new market terrain, consult with trusted advisors to consider all the implications.
