Economic Nexus
A sales tax obligation trigger based on the dollar value or number of transactions in a state, regardless of physical presence, established after South Dakota v. Wayfair (2018).
FAQs
How do I know when I've crossed an economic nexus threshold?
You must monitor sales by state on an ongoing basis, tracking both revenue and transaction counts. This requires sales data tagged by customer shipping address. Most ecommerce platforms and accounting tools can generate state-by-state sales reports. Sales tax software like Avalara and TaxJar automate threshold monitoring and alert you when thresholds are approaching or crossed.
Does economic nexus apply to B2B sales?
Economic nexus applies to all sales of taxable goods or services, regardless of whether the buyer is a consumer or business. However, many B2B sales may be exempt from sales tax through resale certificates (goods purchased for resale) or manufacturing/industrial exemptions. Exemption certificate management is a critical compliance step for B2B sellers.
Are marketplace sales counted toward economic nexus thresholds?
This varies by state. Many states have marketplace facilitator laws where the marketplace (Amazon, eBay, Etsy) collects and remits tax on behalf of third-party sellers, and those sales may not count toward the seller's own nexus thresholds. Other states count marketplace sales toward the seller's thresholds. Check each state's specific rules.
Related Terms
Sales Tax Nexus
The level of connection between a business and a state sufficient to require the business to collect and remit sales tax in that state.
Value Added Tax
A consumption tax levied at each stage of production and distribution, collected by businesses on behalf of the government throughout the supply chain.
Goods and Services Tax
A broad-based consumption tax applied to most goods and services, similar to VAT, used in Canada, Australia, India, Singapore, and other countries.