Nexus & Lock in Letters

Nexus

Nexus is used within the United States to indicate that the employer has a business presence in a particular state, and therefore is subject to income taxes within that state. Generally, nexus is determined if the employer owns or leases property in the state, derives income from within the state, has capital or property in the state, or employs personnel in the state (in activities that exceed "mere solicitation").

Nexus is an important element in SPF because without it an employee could be served incorrect payroll forms. If nexus is not specified, SPF will act as if a user has nexus in every state. This could result in an employee completing more payroll forms than they need, but will also make sure they complete all required withholding forms for their tax scenario.

SPF Hosted allows clients to specify Nexus within the SPF Registration JSON file using the "nexus" array. The array accepts the following enum values: "FEDERAL", "AL", "AK", "AZ", "AR", "AS", "CA", "CO", "CT", "DE", "DC", "FM", "FL", "GA", "GU", "HI", "ID", "IL", "IN", "IA", "KS", "KY", "LA", "ME", "MH", "MD", "MA", "MI", "MN", "MS", "MO", "MT", "NE", "NV", "NH", "NJ", "NM", "NY", "NC", "ND", "MP", "OH", "OK", "OR", "PW", "PA", "PR", "RI", "SC", "SD", "TN", "TX", "UT", "VT", "VA", "VI", "WA", "WV", "WI", "WY"

Below shows how a user can specify which states they have nexus in.

Sample SPF Registration

"nexus": [
        "AK",
        "CT",
        "GA"
    ]

Lock in Letters

At times, the Internal Revenue Service (IRS) may give an employer an order to withhold taxes at a minimum rate. Therefore, SPF Hosted provides a mechanism to prevent employees from changing certain state or federal withholding forms.

Sample SPF Registration

In the sample SPF Registration below, use the lockInLetters element to provide a single state abbreviation or a comma-separated list of states where the employee has a Lock in Letter on file. For a Federal lock-in letter, use the value FEDERAL.

        "lockInLetters": [
            "CA",
            "CO",
            "GA",
            "KY"
        ]