Glossary
Sales tax nexus
The connection with a state that obliges a seller to register, collect and remit that state's sales tax. Created by physical presence or, since 2018, by sales volume alone.
Physical nexus is the old rule: an office, employees, inventory (including inventory in a marketplace warehouse) or property in the state. Economic nexus, since the Wayfair decision, is the new one: most states set the threshold at $100,000 of sales into the state in a year, some at 200 transactions, and California, Texas and New York at $500,000. Cross the threshold and the obligation starts, usually from the next transaction.
Marketplaces (Amazon, Etsy, eBay) now collect on behalf of their sellers in every state with a sales tax, which removes the collection burden but not always the registration one. Sellers on their own Shopify store carry the full obligation. Uncollected sales tax comes out of the seller's margin when a state audits, and states look back several years.
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