Sales tax nexus is the connection between your business and a state that creates an obligation to collect and remit sales tax there. If you have nexus in a state, you must register with that state, collect sales tax from customers located there, file returns, and send the money. Without nexus, you have no obligation to collect their sales tax.

Nexus used to be straightforward. Physical presence in a state through an office, warehouse, employees, or stored inventory meant you had nexus there. That changed in 2018 when the Supreme Court ruled that states can require sales tax collection based on economic activity alone, even without any physical presence. This decision opened the door for every state to set economic nexus thresholds.

Most states now use thresholds around $100,000 in sales or 200 transactions within a calendar year. Cross that line and you have economic nexus, meaning registration and collection become mandatory. Some states set lower thresholds. Some only count sales dollars, not transaction counts. The rules vary by state and they update periodically.

Physical nexus still matters too. Storing inventory in a state creates nexus, which catches many Amazon FBA sellers off guard when their products sit in warehouses across the country. Sending employees to work in a state, using sales representatives, or even attending trade shows can trigger physical nexus in certain states. The definitions vary and some states interpret them aggressively.

How this affects your business depends on how and where you sell. A local retailer in Andover with only Massachusetts customers probably has nexus in Massachusetts alone. An e-commerce seller shipping products nationwide might have nexus in a dozen or more states once sales volumes cross various thresholds. Each state with nexus means separate registration, rate configuration, return filing, and payment schedules to manage.

Ignoring nexus obligations doesn’t make them disappear. States share data and are getting better at identifying businesses that should be collecting but aren’t. Getting caught typically means back taxes for the period you should have been collecting, plus penalties and interest. Some states offer voluntary disclosure programs with reduced penalties if you come forward before they find you, but the window for that closes once they contact you first.

Monitoring nexus requires ongoing attention from your Merrimack Valley bookkeeping team. Your sales to each state need tracking so you know when you’re approaching thresholds. When you cross a threshold, you need to register before the collection obligation kicks in, not months later when you finally notice. Staying on top of this prevents surprise tax bills and keeps you compliant without scrambling to catch up.

If you sell products or taxable services across state lines, nexus review should be part of your regular financial routine. Understanding where you have obligations and staying current with registrations protects your business from compliance headaches down the road.