Sales tax nexus resources
Explore the resources below to learn about activity that can establish a nexus obligation for your business.
What is sales tax nexus?
Sales tax nexus is the connection between a seller and a state that requires the seller to register then collect and remit sales tax in the state. Certain business activities, including having a physical presence or reaching a certain sales threshold, may establish nexus with the state.
Discover where your sales may create an obligation to collect sales tax with our interactive sales tax risk assessment tool.
- What business activities trigger nexus?
- How do you determine sales tax nexus?
- What should you do when nexus is established?
Business activities that trigger sales tax nexus
The ruling in South Dakota v. Wayfair, Inc. allows states to base a sales tax collection obligation on sales or transaction volume (economic nexus). More than 43 states now enforce economic nexus.
Physical presence in a state — such as a brick-and-mortar location — creates an obligation 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.
People can be your biggest asset but can also trigger sales tax nexus in more jurisdictions. Independent contractors, telecommuting employees, traveling representatives, and even trade show attendance can establish nexus in some states.
Having agreements to reward persons in another state for directly or indirectly referring potential customers through a web link or in-state website can establish what’s often referred to as click-through nexus.
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.
Advertising, drop shipping, or receiving referrals from in-state businesses are all activities that can trigger sales tax nexus. Information about additional activities that establish nexus can be found in our Know Your Nexus ebook.