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Sales Tax Economic Nexus
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Sales Tax Economic Nexus

This article aims to provide strategic steps to determine if a seller has sales tax economic nexus in certain states. It does not intend to provide economic nexus thresholds because many third party websites already provide the info. The following are steps to determine Economic Nexus for sales tax.

1) Create a report for most recent 12 month sales. The report should have 4 columns by state, with a column for "Marketplace gross sales", "nonMarketplace gross sales", "Marketplace number of sales", and "NonMarketplace number of sales". For example, a Marketplace is Amazon, Walmart, Ebay, or similar marketplace. NonMarketplace sales would include any sales outside of a Marketplace, such as on a website, or other sales channels. The "number of sales" is the number of orders or invoices. For example, if you sell 100 widgets on 1 invoice, it is 1 sale, not 100 sales.

2) Search the internet for the economic nexus thresholds in the states. It is easy to find as there are many third party websites with the info. You might search using the keywords "sales tax economic nexus". Economic Nexus thresholds are usually defined with a "Gross sales/year" amount, AND/OR a "Number of Transactions/year". Each state specifies their own nexus threshold. Pay attention to any "AND" and "OR" in the threshold. For example, ($100,000 AND 200 sales) versus ($100,000 OR $200 sales). Some states only define a Gross Sales without specifying any transaction number. For example, CA has a nexus threshold of $500,000/year. If you sell in Marketplaces like Amazon, Walmart, Ebay, Google, Etsy or other marketplaces, some state thresholds exclude the sales from Marketplaces, although most states thresholds would include marketplace sales. Please take the third party website nexus thresholds "with a grain of salt" as some info might be outdated or inaccurate. Compare the nexus thresholds among several sources. You might also Call each state's sales tax phone number to verify the latest economic nexus thresholds.

3) Merge the threshold in step 2 into the sales report in step 1 for each state. Now you should be able to determine the states where you have sales tax economic nexus based on meeting the proper thresholds for each state.

4) Next, decide if you want to register in the states where you have nexus. We provide "Managed filing services" which includes registration, data processing, filing, paying, reading letters/emails, and resolving state notices. Our process is reliable and efficient as most clients only send us 1 or 2 emails/month and have time to focus on other work. We can discuss your specific nexus situation to help you decide the states in which to register.
Whether your firm needs to outsource sales tax registration, filing, or need a sales tax consultant, we are the destination.

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