Money, sales tax and addresses · A term for founders abroad
What is economic nexus?
Sales into a state above its threshold, usually $100,000 a year, which makes a seller elsewhere collect that state's sales tax with no presence there.
Checked against the IRS's instructions and the states' own rules. Reviewed by Saais Patel, compliance reviewer.
Term 28 of 105 in the glossary, filed under E.Supreme Court: South Dakota v. Wayfair (2018)
Economic nexus, for a founder abroad.
Since the Supreme Court's 2018 Wayfair decision, every state with a sales tax sets a sales threshold above which a seller elsewhere has to collect its tax. Most use $100,000 a year. California and Texas use $500,000, and New York needs both $500,000 and more than 100 sales.
Below the threshold, with no presence in the state, a seller owes it nothing. Marketplaces collect on their own sales, but in many states those sales still count toward the threshold. Once over it, you register in that state and collect from then on.
Sources: Supreme Court: South Dakota v. Wayfair (2018); California CDTFA: remote sellers after Wayfair; Texas Comptroller: remote sellers; New York Tax Department: do I need to register for sales tax?.
Read next · guide · 3 minSales tax for non-resident sellers: nexus, marketplaces, and when you actually registerWhat founders ask next.
- What is the economic nexus threshold in most states?
- $100,000 of sales into the state a year. California and Texas use $500,000; New York needs $500,000 and more than 100 sales.
- Does economic nexus apply to sellers outside the US?
- Yes. It turns on sales into the state, not where the seller is. The sales tax guide has the details.
03 · See also
- Money, sales tax and addressesNexusThe link with a state that obliges a seller to collect its sales tax, created by a presence there or by sales above the state's threshold.Read the term
- Money, sales tax and addressesMarketplace facilitatorA marketplace such as Amazon or Etsy that state law makes responsible for collecting sales tax on its sellers' sales.Read the term
- Money, sales tax and addressesSales tax permitA state registration that lets a seller collect its sales tax and buy stock for resale tax-free; needed once there's nexus, and not a business licence.Read the term
- Money, sales tax and addressesResale certificateA form a registered seller gives a supplier to buy goods for resale without paying sales tax, based on its sales tax registration in a state.Read the term
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