Economic Nexus
Tax nexus based on sales volume or transaction count in a state.
Economic nexus creates a tax collection obligation based on a business's economic activity in a state, regardless of physical presence. Most states set thresholds at $100,000 in sales or 200 transactions per year. The 2018 South Dakota v. Wayfair Supreme Court decision established the legal foundation, and nearly all states have since adopted economic nexus rules.
Example
A subscription box company with no physical presence in Pennsylvania surpasses $100,000 in sales to PA customers, triggering economic nexus and a requirement to collect PA sales tax.
Why It Matters for Your Business
Economic nexus has dramatically expanded sales tax obligations for online sellers—if you sell across state lines, you likely have collection duties in multiple states.
Related Terms
More Taxes Terms
Adjusted Gross Income
Gross income minus specific deductions like retirement contributions.
Tax Audit
An examination of tax returns by the IRS to verify accuracy.
Capital Gains
Profit from selling an asset for more than its purchase price.
Capital Loss
Loss from selling an asset for less than its purchase price.
Tax Deduction
An expense that reduces taxable income.
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