Nexus is the connection between your business and a state that requires you to collect and remit sales tax there. Two types of nexus exist: physical nexus and economic nexus. You need to evaluate both for every state where you do business.

Physical nexus comes from having a tangible presence in a state. This includes employees working there, inventory stored in warehouses or fulfillment centers, offices or retail locations, and sometimes even attending trade shows. If you have any physical footprint in a state, you likely have nexus there regardless of how much you sell.

Economic nexus is based purely on sales volume or transaction count. After the Supreme Court’s 2018 Wayfair decision, states can require out-of-state sellers to collect sales tax once they exceed certain thresholds. Most states use $100,000 in sales or 200 transactions as the trigger, though the specifics vary. Some states use only a dollar threshold. A few have lower limits.

The challenge is that each state sets its own rules. What creates nexus in Florida may not create nexus in Georgia, and vice versa. Some states count only taxable sales toward the threshold while others count total sales including exempt items. Some measure by calendar year, others by trailing twelve months. Getting this wrong means either collecting tax you shouldn’t or failing to collect tax you should.

Start by listing every state where you have any physical presence. Then look at your sales data by state. For states where you’re approaching or exceeding $100,000 in annual sales, research that state’s specific economic nexus rules. The thresholds are just the starting point. You also need to understand what’s taxable in each state, since tax rates and taxable items differ everywhere.

If you sell through Amazon FBA or similar fulfillment networks, pay close attention. Inventory stored in their warehouses across the country can create physical nexus in multiple states even if you never set foot there. Many e-commerce sellers discover they have nexus in a dozen or more states just from fulfillment center locations.

Once you establish nexus somewhere, you generally need to register for a sales tax permit, collect the appropriate tax on taxable sales, and file returns on the required schedule. Missing registration deadlines or filing late creates penalties that add up quickly.

This is an area where getting professional guidance pays off. Sales tax compliance across multiple jurisdictions involves tracking thresholds, understanding exemptions, and staying current as states change their rules. The complexity multiplies with each state where you do business.

For South Florida businesses expanding their reach through e-commerce or hiring remote workers in other states, nexus analysis should happen before you trigger obligations, not after. Controller services in Boca Raton that include proactive tax planning can help you anticipate where nexus is forming and prepare accordingly.