As a small business owner, you’ve likely been introduced to all kinds of financial and legal terminology you’ve never seen before. Today’s word-of-the-day is “nexus.”
The primary usage example of “nexus” is as a legal term that refers to the obligation for businesses to collect and pay state sales taxes. However, taxing jurisdictions in the United States cannot impose sales taxes until they establish nexus—a connection between your business and local jurisdiction.
While it might sound straightforward, it’s anything but. There are a variety of circumstances that may establish a sales tax nexus for your business, even if you don’t have a physical store there. The growth of e-commerce and the explosion of online sales following the COVID-19 pandemic have also further complicated how sales tax nexus applies to businesses, and there are key elements to understand when it comes to tax compliance.
To help you sort out whether you are obligated to pay sales tax to certain states, we’ve created this guide. To understand what a nexus is, the various requirements, and why it matters for your business, keep reading. Or use the links below to jump to a specific section.