Sales tax nexus refers to a business’s connection to a state or locality that triggers a requirement to collect and remit sales tax. Nexus can be established through physical presence, like having an office or warehouse in a state, or through economic presence, such as meeting a certain sales threshold. For ecommerce businesses, understanding where nexus exists is vital for compliance with sales tax laws.
As ecommerce businesses expand, the issue of nexus becomes increasingly important. Even if a business does not have a physical presence in a particular state, selling a significant volume of goods to customers in that state may create a nexus and necessitate sales tax collection. Ecommerce businesses must monitor nexus rules across various jurisdictions, as they are subject to frequent changes. The complexity of sales tax nexus underscores the importance of using accurate software to stay compliant.
For more information on sales tax, check out our ecommerce sales tax guide.