In 2018, the landmark South Dakota v. Wayfair, Inc. expanded the definition of nexus to include economic nexus. In short, if you sell enough in a state, there’s a chance you have to register, collect and remit sales and use tax there, regardless of whether or not you have physical operations in the state. Even if your business is based out of one state, economic nexus requires businesses to pay taxes into other states if they meet or exceed that state’s economic nexus threshold.
It depends. If you are purchasing your product at wholesale with the intention of reselling the product you will need to provide an exemption certificate to the supplier in order to be exempt from the sales tax. It is then your responsibility to collect sales tax from your customers when selling that product. Find our resale certificate chart here.
This guide will take you through state-by-state, giving you the essential facts you need to quickly determine if you or your client may have either Physical or Economic Nexus (or both) in any given state.
There is a common misconception by many retailers that working with independent contractors – anyone that is not directly managed by the company – does not create nexus for the retailer in the state where the contractor is located. However, the services that the independent contractors provide on behalf of the retailer are most often considered doing business in the state where the contractor is located which creates physical nexus.
For most businesses, getting compliant is an essential yet daunting task. Reviewing your situation and total liability is the first step towards compliance. Start out by asking yourself 3 questions.