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.
Operating a business across multiple states in the USA introduces a critical and often complex challenge: tax nexus. Nexus refers to the sufficient connection a business has with a state that triggers an obligation to collect and remit sales tax, or to pay income and franchise taxes in that state. Our free Multistate Business Tax Nexus Analyzer is an essential tool designed to help your business understand where it has established nexus and, consequently, where it has tax obligations.
The landscape of multistate taxation has evolved significantly, especially with the rise of e-commerce. Historically, nexus was primarily based on physical presence, meaning having a brick-and-mortar store, office, warehouse, or employees in a state. However, the landmark South Dakota v. Wayfair Supreme Court decision introduced economic nexus, allowing states to impose sales tax obligations on out-of-state businesses based purely on their economic activity within that state, even without a physical footprint.
Our analyzer helps you evaluate various factors that can create nexus for your business, including:
Physical Presence: Do you have employees working remotely in another state? Do you store inventory in third-party warehouses (like fulfillment centers)? Do you attend trade shows, provide services, or make deliveries using your own vehicles in other states?
Economic Nexus Thresholds: Most states now have specific sales volume ($USD) or transaction count thresholds. If your sales into a particular state exceed these limits (e.g., $100,000 in sales or 200 transactions annually), you likely have economic nexus there. These thresholds vary by state and can change.
Affiliate Nexus: Do you have relationships with in-state individuals or businesses who refer customers to you for a commission?
Click-Through Nexus: Similar to affiliate nexus, this can be triggered by agreements with in-state website owners who link to your site.
Inventory Presence: Storing goods in a state, even through a third-party fulfillment service, almost always creates physical nexus for sales and sometimes income tax.
Providing Services: Performing services in another state, either in person or sometimes even remotely, can establish nexus for income tax or other business taxes.
By assessing these and other common triggers, our Multistate Business Tax Nexus Analyzer provides insights into your potential tax liabilities across various US states. This understanding is vital for ensuring compliance, avoiding costly penalties, and making informed decisions about your business’s expansion and operations within the United States. Take control of your multistate tax obligations today!