Nexus determines where a business must register for, collect, and remit sales tax. Physical nexus arises from a presence such as an office, employees, or inventory in a state. Since the 2018 Supreme Court decision in South Dakota v. Wayfair, states can also impose economic nexus based on the volume of sales or number of transactions into the state, even without a physical presence.
Thresholds and rules differ by state and change over time, which makes multi-state selling a real compliance burden. Businesses that sell online, ship across state lines, or perform services in several states should review their nexus regularly and make sure their commerce systems calculate and record tax correctly.