Sales tax nexus is the connection that exists between a state’s taxing authority and a seller that requires the seller to register and collect and pay sales tax. For example, having an office, remote employees, affiliates or subsidiaries in a particular state will create nexus. But other specified business activities will trigger nexus with the state, too. Surpassing a set amount of sales transactions or sales income is one such business activity.
In 2018, the U.S. Supreme Court recognized that states can require online retailers to collect and remit sales tax if they meet certain economic thresholds. This new form of nexus is referred to as economic nexus and it doesn’t require a physical presence in the state. Depending on which states you sell into and how many sales you have will determine whether you have economic nexus. Each state is free to set their own thresholds; however, the minimum requirements for economic nexus are 200 transactions or more than $100,000 in sales per year.
Retailers operating exclusively via participating marketplaces (i.e. Amazon, Ebay) need not worry about collecting sales tax because the marketplace collects on your behalf. This is a huge benefit because sales tax is complex and varies by city, county and state, so it’s important to follow the rules.
ADKF, is the largest, locally-owned public accounting firm in San Antonio, Texas, with branch offices in Boerne and New Braunfels. We have been serving our community for 29 years. We are a full-service CPA firm that employs a broad range of tax, audit, bookkeeping, and consulting services and superior customer service to help our clients meet their goals and objectives. Our partners are committed to assisting our clients in meeting their goals and objectives through superior client service. Please click here to set an appointment with us.