TO OUR MULTI-STATE BUSINESS CLIENTS

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1 TO OUR MULTI-STATE BUSINESS CLIENTS The following checklist is designed to help determine whether a company is responsible for filing tax returns in the states in which you do business. Some states may require sales tax, franchise tax, business privilege tax returns, or have other reporting requirements. The first step, to determine what needs to be done, is to complete the checklist for each state where you re engaged in business operations. This will help us to determine the level of engagement and the potential liability for each state. The level of Nexus is different for each state and for each activity or tax type. For example, you may be required to collect and remit sales tax or file a franchise tax return but not file an income tax return. Please review the checklist and talk to us when you begin operations in another state to make sure that you are compliant with the State laws. If you have questions about this issue please contact us. 7 Portland Farms Road, PO Box 6477, Scarborough, ME wg-cpa.com 190 Main Street, P.O. Box 429, Saco, ME Tel (207) Fax (207) Tel (207) Fax (207)

2 YES NO COMMENTS OR EXPLANATION 1) If the business is a corporation, was it incorporated in this state? 2) If the business is NOT a corporation, was it organized in this state? 3) Is the business authorized by the Secretary of State to do business in the state? 4) Is the business currently filing any tax returns with the state (specify type of tax)? 5) Has the business previously filed income tax returns in the state? 6) Does the business have an office, agency, warehouse, or other business location owned or leased in the state? 7) Is the business listed in any telephone directories in the state? 8) Does the business maintain a telephone answering service in the state? 9) Does the business perform construction contracts in the state? 10) Does the business act as a subcontractor in the state? 11) Has the business used the court system in this state for any reason, even as a defendant? 12) Does the business own or lease property in the state? 13) Does the business own or lease tangible personal property located in the state? 14) Does the business rent or lease tangible personal property to others who then use the property in the state? 15) Does the business license intangible property such as patents, trademarks, trade names, etc. for use in the state? 16) Does the business license software for use in the state? 17) Has the business ever executed contracts in the state? 18) Does the business have employees or representatives who perform any of the following activities in the state: A. Solicit orders with or with out authority to approve? 1

3 YES NO COMMENTS OR EXPLANATION B. Engage in managerial or research activities? C. Secure deposits on sales? D. Make collections on regular or delinquent accounts? E. Repossess items or property of the business? F. Offer technical assistance and training to purchasers of its products before or after the sale? G. Repair, service, or replace faulty or damaged goods? H. Install or assemble its products? I. Inspect the installations of the business products by its customers or users of its products? J. Pick up or verify destruction or damaged or returned merchandise from customers or users of the business? K. Coordinate delivery of merchandise, whether or not special promotions are involved? L. Distribute replacement parts? M. Conduct credit investigations or arrange for credit and financing for purchasers of its products? N. Rectify or assist in rectifying any product, credit, shipping or similar complaint arising from the purchase of use of its products? O. Service or maintain displays of its products? P. Accept returned merchandise for customers? Q. Sell tangible personal property? R. Make "on the spot" sales of company products? S. Perform engineering or design functions? 2

4 YES NO COMMENTS OR EXPLANATION T. Check the inventory of customers, advise customers or distributors as to minimum inventory levels; remove obsolete, damaged, or outdated goods? U. Handle complaint forms and forward to the proper location for processing? (If yes, provide a copy of form.) V. Process complaints? W. Investigate, recommend, or appoint potential dealers, agents, or distributors of the company in the state? X. Arrange financing for customers in the state or through lenders located in the state? Y. Conduct training courses, seminars, or lectures? 19) Does the business have a standard form of written agreement with sales representatives? If so, please enclose a copy. 20) Does the company provide a warranty or service contract for products sold to customers in the state? 21) Does the business investigate, recommend, or appoint potential dealers, agents, or distributors of its products or services in the state? 22) Does the business provide computer programming or data processing services in the state? 23) If the business is a member of an affiliated group of corporations does the business file: A. Consolidated return in the state? B. A combined return for a unitary business group in the state? 24) Does the business have any affiliates who conduct business in the state and perform any services for the company in the state? 3

5 YES NO COMMENTS OR EXPLANATION 25) Does the business maintain a bank account or other investment in the state? 26) Does the business have display merchandise in leased space in the state? 27) Does the business contract with a third party that is located in the state to print and distribute promotional materials to customers and potential in and outside the state? 28) Does the business drop ship orders from the state? 29) Do employees have samples in the state? If yes, then state the average value thereof. 30) Does the business have any goods, property, or equipment on loan in the state? (e.g., signs, display cases, tools & dies, molds, patents, etc.) 31) Does the business reserve the right of inspection of the customer's facilities or products after delivery? 32) Does the business provide sales or service manuals to customers, distributors, or agents? 33) Does the business advertise in the state? If so, list the different advertising medial used. 34) Does the business do any localized advertising (cooperative or otherwise) in the state? 35) Does the business have any employees or representatives who use their in-state home: A. As a business address? B. To receive business callers? C. To store inventory? D. To maintain books/records? E. To maintain company property? 4

6 36) Are employees reimbursed for telephone, fax, or utilities expenses? 37) Are home numbers listed in local advertisements of the business 38) Do employees of the company solicit orders for the sale of: A. Real Estate? B. Services? C. Intangible property? 39) Does the business have any consigned stock of goods in the state? 40) Does the business operate a mobile store in the state? 41) Does the business maintain a security interest/mortgage in property until the contract price or amount borrowed has been paid? 42) Does the business have agents or independent contractors selling products in the state and are they forbidden from selling or promoting competitors' services? 43) Does the business give approval to servicing distributors and dealers within the state where customers can have products serviced or repaired? 44) Does the business own an interest in a passthrough entity that has operations, conducts business, or owns real property in the state? 45) Do delivery persons assist with the "set-up" or installation of the business' products? 46) Are products shipped to the state in returnable containers? 5