- Definition and Importance: Sales tax nexus establishes a business’s obligation to collect sales tax based on its connection to a state, which can arise from physical presence or economic activity, especially following the 2018 Supreme Court ruling in South Dakota v. Wayfair, Inc.
- Types of Nexus: Businesses may encounter various forms of nexus, including physical nexus (e.g., offices or employees in a state), economic nexus (based on sales volume or transaction counts), click-through nexus (from affiliate partnerships), and marketplace nexus (where online marketplaces collect sales tax on behalf of sellers).
- Steps for Compliance: To determine sales tax nexus exposure, businesses should review their activities and sales data, evaluate affiliate and marketplace relationships, monitor changes in state laws, and register for sales tax permits in relevant states to avoid penalties and ensure compliance.
Source Taxually
