Explaining What Is Economic Nexus: Simplified

Economic nexus legislation establishes a business’s obligation to collect and remit sales tax, even without a physical presence in a state. Historically, businesses only had to meet sales tax obligations when maintaining tangible personal property or operations within a jurisdiction. However, after the South Dakota v. Wayfair decision, states now enforce sales tax based on revenues or the number of transactions made within their borders. Crossing a nexus threshold, such as $100,000 in revenues or 200 transactions, triggers compliance requirements. Tools like Kintsugi automate the monitoring process for this, helping businesses meet their obligations without manual effort.

For remote sellers, selling tangible personal property or digital goods means they can easily exceed a state’s dollar threshold. Each jurisdiction sets its own nexus threshold, making it essential to track revenues and transactions carefully. Without automation, businesses risk errors and missed deadlines, leading to penalties. Platforms like Kintsugi simplify compliance by automating sales tax calculations and reporting, ensuring businesses remain confident in meeting their sales tax obligations across multiple states.

What is Economic Nexus?

Economic nexus is the connection between a business and a state that triggers sales tax obligations, even when the business has no physical presence there. Historically, businesses only needed to collect and remit sales tax in states where they maintained tangible personal property or had a clear physical presence, such as warehouses or offices.

However, the Supreme Court’s economic nexus legislation ruling in South Dakota v. Wayfair (2018) changed everything. States can now enforce sales tax obligations based on the total revenues or number of transactions generated within their jurisdiction. Businesses exceeding a state’s nexus threshold through dollar thresholds or transaction counts must register, collect, and remit sales tax.

For example:

• A Shopify business generating $100,000 in revenues or completing 200 transactions in State A has triggered economic nexus and must comply with its taxation rules.
• These thresholds differ by jurisdiction, making it essential for remote sellers to stay informed and proactive about their compliance obligations.

Platforms like Kintsugi can help businesses track economic nexus thresholds across states, ensuring compliance with sales tax obligations without manual guesswork.

Why Economic Nexus Legislation Matters to Your Business

Failing to comply with economic nexus legislation can result in costly penalties, audits, and interest charges for businesses. As states enforce nexus thresholds aggressively, even businesses without a physical presence must track their revenues and transactions to meet their sales tax obligations. Keeping up with dollar thresholds can be complex for companies selling tangible personal property across multiple jurisdictions. According to the NSBA Report, small businesses face growing costs when managing compliance manually. Sales tax automation tools like Kintsugi Intelligence help businesses automate tracking and stay ahead of changing tax requirements.

For remote sellers, growing online sales increase the likelihood of crossing nexus thresholds unknowingly, which can trigger uncollected sales tax and audit risks. For instance, if you surpass a state’s dollar threshold in revenues or complete 200 transactions, you must register and file taxes immediately. Platforms like Kintsugi automate monitoring, registration, and filing, ensuring accurate compliance with state-specific economic nexus legislation. With automation, businesses can reduce errors, stay compliant, and focus on growth across multiple jurisdictions..

How to Identify If You Have Economic Nexus

Monitoring your activity for economic nexus legislation involves tracking revenues and transactions to determine if you’ve crossed a state’s nexus threshold. Here’s how you can identify and manage your sales tax responsibilities:

1. Track Revenues and Dollar Thresholds: Monitor total revenues generated in each jurisdiction. You must register for sales tax collection if you exceed a state’s dollar threshold.
2. Count Transactions: Some states impose economic nexus based on the number of transactions completed, even if revenues are below the threshold.
3. Monitor Changes in State Tax Rules: States frequently adjust economic nexus thresholds and sales tax obligations, requiring businesses to stay current with regulatory taxation updates.

Manual tracking creates significant risks, particularly for remote sellers with high volumes of transactions. Platforms like Kintsugi automate monitoring, alerting you when a nexus threshold has been met and ensuring timely compliance across every jurisdiction where you do business.

Economic Nexus and Remote Sellers

For remote sellers, the lack of a physical presence in a state no longer exempts businesses from sales tax obligations under economic nexus legislation. Selling tangible personal property or digital goods across states requires monitoring revenues and transactions to ensure compliance with nexus thresholds. If a merchant exceeds a dollar threshold, like $100,000 in revenues or 200 transactions, they must register and collect sales tax. The Tax Policy Center highlights the challenges for e-commerce businesses navigating these multi-state jurisdictions. Platforms like Kintsugi can help simplify compliance by automating threshold tracking and ensuring accurate tax collection.

As online sales grow, remote sellers risk missing economic nexus thresholds, which can lead to audits or fines for uncollected sales tax. States now enforce economic nexus legislation strictly, making manual tracking of revenues and transactions impractical. Tools like Kintsugi automate sales tax calculations and filings across all jurisdictions, helping businesses fulfill their obligations efficiently. By leveraging automation, remote sellers eliminate errors and confidently meet their tax compliance requirements.

How to Maintain Compliance with Economic Nexus Laws

Maintaining compliance with economic nexus legislation requires a clear process for tracking, calculating, and remitting sales tax. Here are three essential steps:

1. Monitor Revenues and Thresholds: Use automation to track your dollar thresholds, transactions, and state-specific requirements. Kintsugi Intelligence is just one example of an automation tool that can simplify this process, helping businesses stay compliant across every jurisdiction.
2. Register for Sales Tax Permits: If you’ve crossed the nexus threshold, register to collect sales tax in that state. This applies to both tangible personal property and digital goods.
3. Automate Tax Calculation and Filing: Platforms like Kintsugi handle real-time taxation calculations and sales tax obligations, ensuring timely filings and error-free compliance.

With tools designed for accuracy, businesses can reduce manual effort and mitigate compliance risks across multiple jurisdictions.

Key Takeaways

• Economic nexus legislation requires businesses to collect and remit sales tax when they exceed state-specific nexus thresholds based on revenues or transactions.
• Remote sellers must track their activity, even without a physical presence, to remain compliant with taxation laws.
• Tools like Kintsugi can automate monitoring, sales tax calculations, and obligations, ensuring businesses stay compliant across every jurisdiction.

Simplify Economic Nexus with Kintsugi

Managing economic nexus legislation can be challenging as states enforce different nexus thresholds for revenues and transactions. Platforms like Kintsugi automate compliance, helping businesses track sales tax obligations across every jurisdiction. With tools like Kintsugi, businesses monitor real-time dollar thresholds, automate tax calculations, and streamline filings. Whether you’re selling tangible personal property or digital goods, Kintsugi simplifies sales tax processes, ensuring accurate reporting and effortless obligations management.

Kintsugi eliminates the manual burden of monitoring economic nexus for remote sellers by automating sales tax collection and reporting. With the platform’s integrations, businesses can efficiently meet their compliance needs, reducing errors in tracking revenues and transactions.