Understanding Nexus and its Impact

What is Nexus?

Nexus refers to the connection or presence that a business has in a particular jurisdiction that triggers the requirement to collect and remit sales tax on transactions that occur within that state.

Types of Nexus:

• Economic Nexus: Arises from a business's economic activity within a jurisdiction. Even without a physical presence, exceeding a certain threshold of sales, and/or transactions can trigger economic nexus.

  
  
• Physical Nexus: Occurs when a business has a tangible presence in a jurisdiction. This can include having a physical office, retail store, warehouse, or employees within the state.

Impact of Nexus on Businesses:

• Registration and Reporting: Nexus triggers the need for businesses to register with the state's tax authority.

  
  

• Sales Tax Obligations: Once nexus is established, businesses are typically required to collect and remit sales tax on transactions within the state.

  
  
• Potential Liabilities: Failure to recognize and address nexus can lead to penalties, fines, and legal consequences.