As a CEO or CFO this has an impact on your business; having an economic nexus means you need to register for, collect and remit sales tax in a State even if your business doesn’t have a physical presence there.
The criteria are based on how much you sell. Once sales in a State exceed a certain revenue or transaction threshold, the company has an economic nexus in that State, even if there aren’t any physical offices, warehouses or employees.
This concept gained national prominence following the 2018 U.S. Supreme Court decision in South Dakota v Wayfair. In that case, the Court ruled that individual States may compel out-of-state sellers to comply with local sales tax laws, effectively overturning the previous physical presence standard. As a result, businesses engaging in remote or online sales must now closely monitor their economic activity in each state to determine where tax compliance obligations may arise.
Consider the complications
While the concept of economic nexus is relatively straightforward, its practical application can be complex, primarily because each State applies its own rules and standards.
Navigating compliance in different US States becomes particularly challenging:
- Different thresholds across States
Some States consider only total sales volume when determining economic nexus; for example, California sets the threshold at $500,000 in annual sales. Others, such as Illinois, apply a dual test where the economic nexus is triggered by either $100,000 in sales or 200 separate transactions within the State.
- Frequent changes to the rules
Economic nexus regulations are not static. Thresholds, filing requirements and even the definitions of taxable activity can change from time to time; this requires CFOs to stay informed.
- Not all definitions are the same
States have different rules in how they measure sales for nexus purposes. Some States include exempt sales or sales made through third-party marketplaces (like Amazon), while others exclude them from the calculations. States also differ in defining the period in which the threshold is measured, for example, the last calendar year, the current calendar year or the proceeding 12 months.
- Taxable items vary by State
There is no uniformity in what States consider taxable sales. Services, digital products, or groceries may be subject to sales tax in one State and completely exempt in another.
The impact of Nexus on your growth
If you’re growing rapidly, selling across multiple states or using multiple sales channels such as Amazon or Shopify, you may already have sales tax obligations in States where you have no physical presence.
Given that every State has its own rules, keeping track of where and when you have triggered an economic nexus can quickly become overwhelming.
Calculate your tax exposure with a Nexus checker
In response to the growing number of businesses, particularly remote sellers, who need to navigate US sales tax compliance, Tax Desk has created a Nexus checker tool.
The Nexus checker helps CFOs and CEOs to easily:
- Understand the up-to-date economic nexus threshold (sales value and/or transaction volume) by State
- Have a clear view on whether you are approaching or have exceeded the thresholds in each State based on your sales data
- Give practical guidance on where and when you need to register and what to do next
In essence, it is everything you need to assess your compliance status in the US.
Speak to an expert
If you are unsure about your obligations or how to proceed after identifying nexus, then our team of tax professionals is ready to support you. We offer comprehensive services, including:
- Advising and monitoring economic nexus exposure across all US States
- Registering in States where thresholds are exceeded
- Handle ongoing sales tax filings and ensuring full sales tax compliance across all US jurisdictions
Contact our team of experts today for tailored assistance and peace of mind.
Download our latest guides : Nexus checker