What Is a State Tax Nexus?

Nexus is the connection between a business and a state that requires the business to collect sales tax or pay income tax in that state. Historically, nexus required a physical presence (an office, store, or employee). After the 2018 Supreme Court case South Dakota v. Wayfair, states can now impose nexus based on economic thresholds — like making over $100,000 in sales or 200 transactions in the state. If your business sells across state lines, nexus is critical to understand. Failing to collect and remit sales tax where you have nexus can result in significant back taxes and penalties.