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# Collection Requirements and Nexus

Sales tax nexus is a common reason some businesses collect sales tax in
certain states but not in others. It's a connection between a business
and a state that can trigger an obligation to collect and remit sales
tax there. Every state defines nexus slightly differently, but most
rules fall into two categories: a **physical presence** in the state,
or an **economic connection** large enough to cross the state's
threshold.

This page explains common nexus triggers and thresholds to double-check
for each business and state before collecting sales tax.

## Physical nexus

Physical nexus typically applies when a business has a tangible tie to
a state. Common triggers include:

* An office, store, or other location in the state (a home office
  counts).
* An employee, salesperson, or contractor working in the state.
* A warehouse or storage facility in the state.
* Inventory stored in the state, including stock held by a
  fulfillment partner like Amazon FBA.
* A third-party affiliate promoting or selling on the business's
  behalf in the state.
* Temporary in-state physical activity, such as a trade show booth or
  craft fair table.

Physical nexus is the older of the two doctrines and is usually the
easier one to assess: if a person, a building, or goods are in a state
on a business's behalf, that's commonly enough to establish nexus.

## Economic nexus

Economic nexus laws can require online sellers to collect sales tax in
a state once their sales into that state cross a set threshold, even
without any physical presence. The doctrine follows from the 2018
*South Dakota v. Wayfair* Supreme Court ruling, and every state with a
sales tax has since adopted some form of it.

A typical rule reads: if a seller makes more than \$X in sales into the
state, or completes more than X transactions with buyers in the state,
they may be required to collect and remit sales tax on those sales.

Thresholds vary by state:

* Some states use a **sales-dollar threshold** only (commonly
  \$100,000).
* Some use a **transaction-count threshold** only.
* Many use **either one**: nexus can trigger when the first threshold
  is crossed.
* A few require **both** to be met before nexus applies.

Because each state's law is different, a practical first step when
entering a new state is to pull up that state's current rule and check
whether the business meets the threshold.

## Check the rules state by state

TaxCloud publishes a running state-by-state reference covering the
current physical and economic nexus rules in every US state. It's a
quick way to look up the specifics for a given jurisdiction.

> **Info**
>
> See [Sales Tax Nexus by State](https://taxcloud.com/blog/sales-tax-nexus-by-state/) on
> TaxCloud's blog for the full list of thresholds and physical-nexus
> triggers per state.

> **Warning**
>
> This page is a general overview, not tax advice. Rules and thresholds
> change, and the right answer for a specific business and state often
> depends on facts and circumstances. Confirm current requirements
> directly with the state or with a qualified tax professional before
> acting.

## Related

#### [Quickstart](../tutorials/quickstart)

Get a first rate back from Ziptax in under five minutes.

#### [By Address](../rest-api/by-address)

Look up rates for a full street address in a state where a business
has nexus.

#### [Taxability Information Codes](../product-rules/taxability-information-codes)

Refine rates by product category once collection has started in a
state.

> Understanding when a business is required to collect sales tax based on Nexus