Why This Matters

Before online commerce became common, sales tax obligations were largely associated with having a physical presence in a state.

Today, states may also have economic nexus rules based on the amount or volume of business conducted with customers in that state.

That means an online business can potentially develop sales tax responsibilities outside its home state as it grows.

Common Mistakes

• Thinking nexus only means having a physical office

• Assuming one nationwide sales threshold applies

• Ignoring where inventory is stored

• Reviewing nexus only when starting the business

• Confusing income tax nexus with sales tax nexus

• Registering in every state unnecessarily

Harvest's Recommendation

Track your sales by customer location from the beginning.

Your accounting or e-commerce system should make it relatively easy to see how much revenue is being generated in each state.

Review that information periodically, particularly when the business is growing rapidly.

Good to Know

Each state establishes its own sales tax rules, exemptions, filing requirements, and nexus standards.

That is why a business can have an obligation in one state while having no filing requirement in another, even with similar sales activity.

When It's Time to Get Help

You should consider professional guidance if:

• Sales are increasing across several states

• You have crossed or are approaching a state's economic nexus threshold

• You store inventory in multiple states

• You use fulfillment services

• You sell both directly and through marketplaces

• You are unsure whether past sales created an obligation