Economic Nexus

Before 2018, a state could only require businesses to collect the sales tax if they have a physical presence in that state. The 2018 Supreme Court ruling in South Dakota v. Wayfair changed everything, the states now can require an out-of-state sellers to collect sales tax based on economic activity alone.

 

What triggers economic nexus???

Economic nexus is triggered when a business exceeds a state’s sales threshold in that particular state.  This is true even with no physical presence in that particular state. Once triggered, a business must register, collect, and remit sales tax in that state.

The Thresholds are different between the states, although most states follow similar pattern.

What is Taxable in the US???

Taxability is entirely state driven. Each state, and sometimes locality sets their own rules. The same product or service can be taxable in one state and exempt in another.

Exemption Certificate

A document provided by a buyer to a seller that authorizes the seller to not collect sales tax on the purchase. The certificate shifts the legal liability for the tax from the seller to the buyer. 

Each state has many different types of exemption certificates.

Use Tax

Some States