Sales tax nexus
Sales tax nexus is the connection between a business and a state that obligates the business to collect and remit that state's sales tax. It can come from a physical presence or from crossing an economic threshold of sales into the state.
Physical nexus comes from things like an office, employee or inventory in the state. Economic nexus comes from sales volume: most states set a threshold, commonly $100,000 of sales into the state, after which collection is required. Rules and thresholds differ by state and change, so your CPA or the state revenue agency confirms where you stand.
Example
An online store in New York ships nationwide. Storing inventory in another state's fulfillment center creates physical nexus there, and passing that state's economic threshold by shipping to its residents creates economic nexus, even with no location in the state.
Common mistake
Assuming no location in a state means no obligation. For remote sellers, economic nexus rules mean sales volume alone can create a filing duty, and marketplaces have their own facilitator rules that differ from direct sales.
How to use it
Review where you sell and where inventory or people sit at least yearly, track collected tax as a liability by jurisdiction, and let your CPA or a filing service handle registration and returns. Your bookkeeper keeps the records those filings depend on.
Physical nexus
The traditional trigger: an office, warehouse, employee or inventory in the state. For ecommerce sellers, inventory stored by a fulfillment provider in another state is the classic surprise: the stock is yours, so the presence is yours. Trade shows and remote employees can also create physical nexus in some states.
Economic nexus
After the 2018 Wayfair decision, states adopted economic nexus rules: cross their sales threshold and you must collect, location or not. Most thresholds sit around $100,000 of sales into the state, some count transactions too, and the details differ. Track sales by destination state so you can see a threshold coming before you cross it.
Marketplace facilitator rules
When you sell through a marketplace that collects tax for you, the marketplace generally handles collection on those sales. Your own direct website sales are still yours to manage. The split matters for nexus too: some states count marketplace sales toward your threshold and some do not. Keep channel-level sales reports so the analysis is possible.
What your bookkeeping controls
Your books do not decide nexus; they document it. Clean sales-by-state reporting, collected tax held as a liability, and reconciled sales tax payable accounts are what your CPA or filing service needs to register, file and answer notices. That record-keeping is exactly what monthly bookkeeping provides.