US Multistate Business Tax Nexus Evaluator
What is Tax Nexus?
Tax nexus is the connection between your business and a state that requires your business to register with that state, collect and remit sales tax on taxable sales to customers in that state, or file state income tax returns.
Without nexus in a state, you generally do not have a tax obligation there (with exceptions). If you *do* have nexus, you are required to comply with that state's tax laws.
Understanding where you have nexus is critical for multistate businesses to avoid penalties, interest, and back taxes.
Types of Nexus:
- Physical Presence Nexus: Historically, nexus was primarily based on having a physical presence in a state. This includes having an office, employees, inventory, or representatives performing services there.
- Economic Nexus: Following the 2018 Supreme Court decision in *South Dakota v. Wayfair, Inc.*, states can now require businesses without a physical presence to collect and remit sales tax if their economic activity in the state exceeds certain thresholds (typically based on sales revenue or number of transactions). Many states have also enacted economic nexus rules for income tax.
Sales Tax vs. Income Tax Nexus:
It's important to note that the rules for sales tax nexus and income tax nexus can differ. You might have sales tax nexus in a state but not income tax nexus, or vice versa, depending on that state's specific laws and the nature of your activities.
This tool helps you evaluate potential nexus factors based on common principles. It does not provide definitive legal or tax advice for your specific situation.
Select a state and indicate the activities your business has in that state that might create tax nexus. Then click "Add State Data". Your entries are saved in your browser.
Enter the state you are evaluating activities for.
Potential Nexus-Creating Activities:
Check all factors that apply to your business activities in the state entered above. These are common factors that *may* create nexus, depending on state laws.
Economic nexus thresholds vary significantly by state (e.g., $100,000 in sales or 200 transactions annually, but amounts differ). You need to check the specific state's threshold.
Summary of potential nexus factors identified. This highlights areas where you need to conduct specific research.
Add state data in the "Evaluate Activities by State" tab to generate your research summary.
This summary is based on the activities you selected for each state. It does not automatically determine nexus or cover all potential factors. State tax laws are complex and change frequently.
This tool is an educational aid based on common nexus concepts. It is NOT a substitute for professional tax or legal advice. State nexus rules are complex and vary.