Economic nexus

An economic nexus is a sales tax nexus (tax presence) determined by economic activity, like the amount of sales you make in a particular state.

The concept of economic nexus refers to ”tax standards” that look to criteria other than the physical presence of a business in evaluating a seller’s connection to that state.

In other words a nexus is basically a connection between a taxing jurisdiction, like a state, and an entity, for instance a business that must collect or pay the tax.

In this category you can have any kind of economic activity that could trigger the nexus but only after your total sales reach a certain amount.

Moreover you can acquire an economic nexus regardless of where your business, employees, or warehouses are located. If your sales in that state are substantial enough, then you are liable for sales tax in that state.