Economic Nexus: Everything You Need to Know

Entering the ecommerce world can be thrilling, but the jargon can be daunting. One term you’ll encounter is “economic nexus,” a key concept in sales taxes.

What is Economic Nexus?

Economic nexus determines if your ecommerce business has a significant presence in a state, requiring you to collect and remit sales tax.?

This became prominent after the South Dakota v. Wayfair case in 2018. If your business meets certain criteria in a state, you must comply with its tax rules.

Why It Matters

Understanding economic nexus helps you avoid legal issues and plan your sales strategy. Key factors include:

• Sales Revenue: Total sales in a state. Exceeding a state's threshold establishes nexus.
• Transaction Volume: Number of transactions in a state. High volume can also establish nexus.
• State Laws: These can change, so keep up-to-date to stay compliant.

State-by-State Variations

Economic nexus laws differ across states, each setting its thresholds based on sales or transactions.?

Here are some examples:

• Alabama: $250,000 in sales (previous year)
• California: $500,000 in sales (preceding or current year)
• New York: $500,000 in sales AND 100 transactions (preceding four sales tax quarters)
• Texas: $500,000 in sales (preceding twelve calendar months)

Seeking Expert Advice

Navigating these complexities can be challenging. Consulting with sales tax professionals like TaxHero ensures your business stays compliant and thrives.

Need Help?

Schedule a call with our CEO for a personal onboarding session on how TaxHero conducts nexus checks. We offer comprehensive services to help you understand and adapt to state-specific laws, ensuring your ecommerce business remains compliant and successful.

In case you want to dive deeper into the topic of economic nexus, you can learn more about it here.?