Industry Report

Understanding Nexus Rules: When Do You Need to Register for Sales Tax

In-depth analysis of nexus rules to help you accurately determine which states require sales tax registration to avoid compliance risks.

Michael Rodriguez2024-01-206 min read

Sales taxNexus rulesCross-border e-commerceTax complianceRegistration

What is nexus?

Nexus is the legal connection between a business and a state that requires the business to register, collect, and remit sales tax in that state.

Physical nexus

Employees located in the state.
An office, warehouse, store, or other place of business.
Inventory stored in the state.
Sales representatives, agents, trade shows, or in-state events.

Economic nexus

After South Dakota v. Wayfair in 2018, most states adopted economic nexus rules. A remote seller can trigger nexus by exceeding a sales or transaction threshold even without physical presence.

Sales thresholds often range from $100,000 to $500,000.
Some states include transaction thresholds such as 100 or 200 orders.
Measurement periods commonly look at the current or prior calendar year.

When to register

Register promptly when nexus is triggered.
Review whether historical sales create retroactive exposure.
Continue monitoring new states as sales grow.
Keep detailed sales and nexus trigger records.