Sales tax nexus resources

Learn about the business activities that can establish a nexus obligation and how laws vary by state by exploring the resources below.

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What is sales tax nexus?

Sales tax nexus is the connection between a seller and a state that requires the seller to register, collect, and remit sales tax on sales made in the state. Certain business activities such as having a physical presence in a jurisdiction or reaching a sales threshold may establish nexus with the state. 

Our Know Your Nexus ebook answers the key questions every business should ask: 

  • What business activities trigger nexus?
  • How do you determine sales tax nexus?
  • What should you do when nexus is established?

Need more information on activities that can trigger sales tax nexus?

Physical presence

If your business has a physical presence in a state — such as a brick-and-mortar location — you’re required to collect and remit sales tax within that state. Physical presence also includes renting or owning property, employing remote workers, even storing property in a fulfillment center or location owned by someone else.

Sales volume

The ruling in South Dakota v. Wayfair, Inc. has paved the way for economic activity (i.e., sales or transaction volume alone) to establish economic nexus in many states. Following the decision, more than 40 states are now enacting or enforcing economic thresholds that require out-of-state sellers to register, collect, and remit sales tax.

Click-through nexus

Online referrals such as contracts with an individual or business in another state to directly or indirectly refer potential customers through a web link or an in-state website can establish nexus. This is sometimes called click-through nexus. Most states have tied a sales threshold to online referrals or click-through activity, meaning you must generate a certain amount of sales to trigger sales tax nexus.

Affiliate relationships

Sales tax nexus can be established if an out-of-state retailer is affiliated with an entity that has nexus in another state. An affiliate connection includes using a similar trademark or conducting business on behalf of an out-of-state seller.

Remote employees

People can be your biggest asset and can also trigger sales tax nexus in a new jurisdiction in some surprising ways. Employees that telecommute, independent contractors, traveling representatives, even employees sent to a conference or event can establish nexus in some states.

Other activities

While it’s easy to see why physical presence creates a connection, other activities are not so obvious. Advertising, drop shipping, or referrals from in-state businesses are all activities that can trigger sales tax nexus. Additional activities that establish nexus can be found in our Know Your Nexus ebook.


Do you know where you have to collect?

Nexus obligations vary from state to state. See how Avalara AvaTax helps you stay compliant by tracking the states in which you’re approaching economic nexus and letting you know where you need to register.

 


Figure out where you should collect sales tax

Review your sales volume and discover where you might be obligated to collect sales tax with our interactive, state-by-state sales tax risk assessment tool. 

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Next Steps
Need to register?

Realize you have a nexus obligation and need to get registered? Try Avalara Licensing.

Additional questions

Want to assess your sales tax nexus risk? Chat with us about available options.