Background A state must have a strong connection, also known as “nexus,” to an out-of-state business before it can impose sales and use tax obligations on that business. Previously, physical presence was the law of the land—a business had to have an office, warehouse, employees, or some other physical presence in the taxing state for tax nexus to exist. In 2018, the Supreme Court overturned the decades-old physical presence requirement and ruled that states can impose sales tax obligations on out-of-state businesses with no physical presence in the state. Post-Wayfair, nexus exists for sales tax purposes when a “taxpayer ‘avails itself of the substantial privilege of carrying on business’ in that jurisdiction.” Nexus can still be established by physical presence, but can now also be established by economic or virtual contacts. This new standard, referred to as economic nexus, significantly expands taxpayers’ obligations to report, collect and remit sales tax.
Economic Nexus Economic nex…
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