What is sales tax nexus?
Sales tax nexus occurs when your business has some kind of connection to a state. All states have a slightly different definition of nexus, but most of the time states consider that a “physical presence” or “economic connection” creates nexus. You only have to charge sales tax in the states in which you have sales tax nexus.
Business activities that create sales tax nexus include:
- Having an office, store or other location in a state (even a home office)
- Having an employee, salesperson, contractor, etc. in a state
- Owning a warehouse or storage facility in a state
- Storing inventory in a state (such as in an Amazon FBA warehouses or other 3rd party fulfillment center)
- Having a 3rd party affiliate in a state
- Temporarily doing physical business in a state for a limited amount of time, such as at a trade show or craft fair
Economic nexus – Making a certain amount of sales in a state (either a certain dollar amount or a certain number of transactions). Each State has a difference threshold of sales totals or/and number of transactions.
Important to note: This area of law is changing rapidly. While we strive to keep this post up to date, please use it as a guideline only and get a free consultation should you have specific questions as to how economic nexus applies to your business.
