Sales Tax Nexus.

In plain English

Sales tax nexus is the legal link between your business and a state that obligates you to collect sales tax from customers there and pass it to that state. You create nexus the old-fashioned way by having a physical presence, like an office, a warehouse, inventory, or an employee in the state. Since a 2018 Supreme Court ruling, you can also create economic nexus just by selling enough into a state, measured by a dollar amount of sales or a number of transactions in a year. Each state sets its own thresholds, so a business selling nationwide may owe sales tax filings in many states at once.

01Why it matters

Once you cross a state's threshold, you are on the hook to collect its sales tax going forward, and ignoring it can leave you owing back taxes and penalties out of your own pocket for tax you never charged customers.

02The math, step by step

You run an online shop from one state but ship everywhere. Many states use a threshold around $100,000 in sales or 200 transactions in a year, a level drawn from the South Dakota law the Supreme Court upheld in South Dakota v. Wayfair (2018), but the exact threshold varies by state and some have dropped the transaction count, so you cannot rely on one number for your own state. If your sales into that state pass its threshold, you must register there, start charging its sales tax at checkout, and file returns, even though you have no office or staff in that state.

03What this is NOT

04Receipts

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