Economic Nexus
Category: other
A tax obligation triggered by exceeding sales thresholds in a jurisdiction, without physical presence.
Economic nexus is a legal concept where a seller creates a tax obligation in a state or jurisdiction based on the volume or value of sales, regardless of physical presence. In the US, the 2018 South Dakota v. Wayfair Supreme Court decision established that states can require remote sellers to collect sales tax if they exceed sales thresholds (typically $100,000 in sales or 200 transactions per year). Economic nexus applies in all 45 US states with sales tax.
Examples
- • A California-based seller with $150,000 in Texas sales must register for Texas sales tax even without any physical presence in Texas.
- • Economic nexus thresholds vary by state: some use $100,000 in sales, others use 200 transactions, and some have no transaction count threshold.
- • Marketplace facilitator laws mean platforms like Amazon collect sales tax in states where the seller has economic nexus, but sellers must still track their nexus status.