Sales Tax Nexus

Article Posted on 02/18/2020

Sales Tax Nexus

States have become more aggressive in their efforts to establish nexus with out-of-state businesses.  It’s important to know the different ways nexus may be created & evaluate your business’s presence in other states to determine if there are any responsibilities to register & collect taxes in those states.

Types of Nexus:

Physical Presence – having a business location, warehouse or employee working in a state automatically gives you sales tax nexus in that state

Affiliate nexus – having affiliates in a state that advertise, promote, or facilitate sales and/or help establish or maintain a market in the state can create nexus. 

Click-through nexus – having an agreement to pay a person/business in another state for referring purchasers through an internet link or website.  States may have thresholds & timelines that must be reached before this type of nexus is triggered.

Economic Nexus – having a certain amount of economic activity in a state, typically determined by meeting thresholds on dollar amount of sales and/or number of sales transactions in a given period of time. 

Trade-shows are also an area that can create nexus in other states.  Each state’s rules are different, but spending over a specified amount of time at trade-shows in a state, or engaging in certain activities (like making sales at the trade-show), etc…can create obligations to register or collect/remit sales tax in that state.  It’s a good idea to know the rules in any state you’re going to for trade-shows.

The link below provides additional information regarding types of nexus in addition to a state chart that can be used to determine different states thresholds.  We’ve found it especially helpful for finding state economic nexus thresholds for remote sellers after the Wayfair ruling.

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