Sales tax glossary
What does economic nexus mean?
Economic nexus is an obligation to collect and remit sales tax in a state based on the amount of sales into that state, even without a physical presence there. Each state sets its own threshold, usually a dollar amount of sales and sometimes a transaction count, measured over a set period.
Full guide: Economic nexus, explained
Example
A hypothetical online seller based in one state ships $150,000 of goods a year to customers in another state whose threshold is $100,000 in sales. It has economic nexus there and must register and collect that state's sales tax.
Why it matters for sellers
Since the Supreme Court's 2018 South Dakota v. Wayfair decision, every state with a statewide sales tax has adopted an economic nexus rule. Remote sellers can owe tax in states where they have no employees or property, so tracking sales against each threshold is the first step.
Related terms
This definition is general information, not tax or legal advice. Rules vary by jurisdiction and change over time.
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