TaxCloud often gets questions about states’ thresholds for determining a business’ economic nexus. Rest assured, we’re here to ease compliance burdens and help your business operate according to states’ tax laws.
Since the Supreme Court’s Wayfair decision in June 2018, almost all states with sales tax are enforcing recently enacted economic nexus laws, with pending enforcement by remaining states coming soon. As of this writing, 43 states require businesses to collect sales tax when a business has ‘significant presence’ in their state.
We alert merchants when they approach a state’s threshold for economic nexus.
Prior to the Wayfair decision, ‘significant presence’ was defined as having a physical presence (or physical nexus) in a state. Physical nexus could be triggered by having inventory, employees or a brick-and-mortar store. Since Wayfair, however, the definition for ‘significant presence’ has expanded to include economic presence (or economic nexus), with each state determining its own thresholds. These thresholds are based on two things:
1. A merchant’s revenue, per state, and/or;
2. The number of transactions, per state.
The important point is that most states now require online retailers to collect, file and remit sales tax once a retailer hits a state’s threshold for economic nexus. This creates four challenges for most businesses:
1. Where can you find each state’s thresholds?
2. How do you monitor each state’s thresholds? (As we’ve seen, they can change!)
3. How do you track your business’ revenue and transaction volume in each state?
4. How do you prepare, file and remit returns once you’ve attained economic nexus?
TaxCloud provides answers to these questions by automatically tracking both sales and transactions, and by offering filing and remitting services. Additionally, we alert merchants when they approach a state’s threshold, thereby giving businesses sufficient time to obtain a sales tax ID (if necessary) and determine if they want TaxCloud to file and remit for them, or do it on their own.
For merchants who aren’t yet TaxCloud users, we provide a free, detailed overview of states’ nexus thresholds. Just go to State Guides to the map of the United States. Click on a state to obtain information on its economic nexus.
It's that simple.
For additional information, feel free to contact me at firstname.lastname@example.org