Money, sales tax and addresses · A term for founders abroad
What is sales tax nexus?
sales tax. The 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.
Checked against the IRS's instructions and the states' own rules. Reviewed by Saais Patel, compliance reviewer.
Term 69 of 105 in the glossary, filed under N.Supreme Court: South Dakota v. Wayfair (2018)
Nexus, for a founder abroad.
Nexus is the connection with a state that lets it make a seller collect its sales tax. There are two kinds. Physical nexus comes from an office, staff or inventory in the state; stock in a warehouse there creates it whatever the sales. Economic nexus comes from selling enough into the state, usually $100,000 a year, even with no presence there.
Sales tax follows the buyer's state, not yours, so forming in Delaware or Wyoming doesn't avoid it. On marketplaces, the marketplace collects instead of the seller.
Sources: Supreme Court: South Dakota v. Wayfair (2018).
Read next · guide · 3 minSales tax for non-resident sellers: nexus, marketplaces, and when you actually registerWhat founders ask next.
- Does a foreign seller have sales tax nexus in the US?
- Only in states where it holds stock or staff, or sells more than the state's threshold. Most foreign-owned stores have none in their first year.
- Is sales tax nexus the same as income tax presence?
- No. Nexus decides sales tax collection. Income tax depends on a US trade or business, a separate test.
03 · See also
- 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 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
- Money, sales tax and addressesEconomic nexusSales 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.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
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