Nexus

What is Nexus?

Nexus is a legal term that describes a business’s connection to a state or jurisdiction that is strong enough for the jurisdiction to impose tax obligations. Historically based on physical presence, it now often includes economic presence, such as reaching a certain sales threshold.

Why It Matters

• Determining nexus is the first step in understanding where a business must collect and remit sales tax.

• The shift toward economic nexus has greatly expanded the tax obligations of online retailers.

• Failing to recognize nexus can lead to significant back taxes, penalties, and interest.