Economic nexus goes into effect in five more states starting November 1, 2018

Economic nexus goes into effect in five more states starting November 1, 2018

On Thursday, November 1, 2018, new sales and use tax collection obligations for remote sellers will take effect in five states: Nevada, New Jersey, North Carolina, South Carolina, and South Dakota. These new requirements are due to economic nexus.

Economic nexus laws vary by state, but all link a sales tax collection obligation to a remote seller’s economic activity in a state, typically gross revenue and/or transaction volume.

Until recently, physical presence was a requisite for sales tax — states could only tax sales by businesses with a physical presence in the state. On June 21, 2018, however, the Supreme Court of the United States repealed the physical presence rule with its decision in South Dakota v. Wayfair, Inc. A remote seller’s economic and virtual contacts with a state can now trigger a sales tax collection obligation in states with economic nexus policies.

Most economic nexus states are sticking close to the thresholds referenced in South Dakota v. Wayfair, Inc.: $100,000 in revenue or 200 or more separate transactions delivered into the state. However, there are other considerations. The thresholds are comprised of different sales in different states. In some, for example, only sales of tangible personal property are included; in others, the threshold includes sales of services and/or intangible property (such as ebooks and streamed music).

Below are the details for the five states where economic nexus comes online on November 1.

Nevada

  • More than $100,000 or 200 or more separate transactions 
  • Sales of taxable products into the state 

New Jersey

  • More than $100,000 or 200 or more separate transactions 
  • Sales of taxable products, specified digital products, or services delivered into the state

North Carolina

  • More than $100,000 or 200 or more separate transactions 
  • Taxable retail sales sourced to North Carolina

South Carolina

  • More than $100,000 
  • Sales of taxable and exempt products, electronically transferred products, or services

South Dakota

  • More than $100,000 or 200 or more separate transactions 
  • Sales of taxable and exempt products, electronically transferred products, or services

Economic nexus is spreading like wildfire: Close to 30 states have already adopted it, and more are looking at doing so in 2019. It’s likely to have an enormous impact on businesses that make sales in multiple states.

Not sure where you have an obligation to collect and remit sales tax under expanded remote seller nexus laws? Avalara’s state-by-state guide to sales tax economic nexus rules can help.

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