Nexus FAQs

Prior to June 2018, the U.S. Supreme Court interpreted sales tax nexus under the Commerce Clause as a minimal physical connection with a state; however, in South Dakota v. Wayfair, 138 S. Ct. 2080 (2018), the Supreme Court held that physical presence is no longer the only requirement for sales tax nexus and expanded the meaning of nexus to include sales into a state by a remote seller. In a state with nexus, meeting an established threshold can now be considered sufficient connection with a state for sales and use tax purposes.

As a result, the sales tax nexus standards have changed rapidly since this ruling, and the criteria for determining nexus vary from state to state. Companies will need to plan and prepare accordingly to analyze whether they are responsible for collecting and remitting sales tax in these jurisdictions.

All 45 states that impose a sales and use tax, plus the District of Columbia, have passed sales tax economic nexus statutes.

The dates these laws became effective vary by state, with Missouri’s requirement effective in 2023. The remaining five states do not impose a sales tax.

To get started, you will need the following:

If you need assistance determining your nexus responsibilities, please contact our State and Local Tax Services Team, and we will respond as soon as possible.

Many companies do not realize they have established the requirement to collect sales tax by either having a physical presence or exceeding the economic nexus thresholds, regardless of the industry. For example, many companies have inventory, remote employees in various states, or increased remote sales over the past several years, which may establish nexus in more states than previously thought.

Suppose you have not performed a nexus review and sell/sold property or services to multiple states. In that case, we suggest you complete the review as soon as possible to identify if potential nexus exists in any state.

If you have completed a nexus review in the past, nexus should continue to be monitored and addressed as physical presence is created within a new state and dollar and transaction thresholds are met. If nexus has not been reviewed recently, we suggest you complete the review as soon as possible to identify if potential nexus exists in any new states.

With a few clicks of the mouse and a simple entry of your sales by state, you can identify if you have potential nexus in any state.* The SALT Nexus Platinum Tool will analyze the information entered and provide a summary report identifying states where your company may have nexus. Suppose your company has nexus in a state. In that case, you can plan and take prompt action to remediate potential exposures and identify ways to begin collecting sales tax from your customers.

At Withum, our State and Local Tax (SALT) Team has a wealth of knowledge that our firm leverages for all our clients. Our team is staffed with dedicated professionals with many years of state and local tax experience.

We service individual and business clients throughout the United States and abroad that operate in all types of businesses including:

Withum’s SALT experts are committed to guiding clients through all phases of State and Local Tax planning, registration, and compliance. We are equipped to solve any issue that may arise with your business, anywhere in the nation. Withum’s SALT Team is committed to assisting our clients in addressing their physical and economic nexus challenges.

Many companies have not kept up with the changing tax laws over the past several years. In addition to the economic nexus laws, states have attempted to increase revenues by imposing sales tax on additional products and services and remote auditing sellers. Guidance around these products and services may not be clear and need to be analyzed.

Companies should understand there are methods to remediate any exposures and quickly become compliant for sales tax. If the company is not compliant and a state contacts the company for an audit, significant sales tax exposures could exist (including penalty and interest).

Further, if the company is looking for funding or being acquired, a due diligence review could identify these potential exposures. Therefore, we recommend companies periodically review their nexus footprint and the taxability of their product and service mix.

If your Company has potential nexus in any state, we suggest you take the following steps:

*Any tax advice generated from the Nexus Tool Calculator should be considered in the context of the overall tax services we are providing to you. Preliminary advice should not be relied upon and may not provide penalty protection. The generated report is based on the completeness and accuracy of facts, assumptions, and representations that were provided to us, and on which we relied. We considered tax authorities that are subject to change, possibly even retroactively, and any such changes could affect the conclusions herein. Unless otherwise agreed, we will not update this report for later changes or modifications to the authorities discussed, and we will not take into account any updated, new or additional information.