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Sales Tax Nexus

What Business Activities Trigger Sales Tax Nexus and How Do They Affect You?

Businesses must now consider where they have a physical presence AND where they have an economic presence.

Historically, Sales Tax Nexus represents a physical connection between an out-of-state business and a particular taxing jurisdiction which makes the out-of-state business responsible for collecting and remitting sales tax on their transactions.  Having a physical office or an employee based in a particular state is a clear-cut example of sales tax nexus.  However, there are many more subtle activities that could also trigger sales tax nexus that could represent a risk to your business:

  • Sales reps traveling to another state where they are not based to solicit sales
  • Employees exhibiting at trade shows
  • Service technicians traveling into another state where they are not based to perform service calls
  • An affiliate or agent relationship that supports selling or servicing activities
  • Maintaining inventory in a warehouse (for example with Amazon's FBA program)

Additionally, the U.S. Supreme Court ruling in June of 2018 in the case of South Dakota vs. Wayfair, paved the way for states to compel out-of-state businesses to collect and remit sales tax even when they do not have a physical presence.  This is often referred to as economic nexus.

Economic nexus is determined by the number of sales made into a state - determined by a sales or revenue threshold. Each state determines its own economic standards and it can be a lot to keep up. 

TaxConnex® helps you identify the relevant sales tax nexus-creating activities and determine where you have an obligation to collect and remit sales tax, often referred to as sales tax nexus determination. Where we determine you have nexus, we will recommend simple, proactive steps based on your risk quotient to remedy any potential exposure.



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