• What is nexus?
• What are the criteria used in establishing nexus for sales tax purposes?
• Who or what is controlling the laws concerning the establishment, interpretation, and execution of these tax laws?
• Where can I get more information?

A nexus in general means a connection.  The term nexus is used in tax law to describe a situation in which a business has a "nexus" or presence in a state and is thus subject to state sales, use, income, or sales taxes within that state.  Nexus describes the amount and degree of business activity that must be present before a state can tax an entity.  If it’s determined that a taxpayer has nexus in a particular state, the taxpayer must pay and collect/remit taxes in that state.

For purposes of sales tax liability, the following criteria may be used to establish a nexus relationship:

• If the business has a physical location in the state
• If there are resident employees working in the state
• if there are employees who regularly solicit business in the state
• If the business has property (including intangible property) in the state

Each of these items can be expanded and discussed in greater depth.

tax laws (return to top)

The following governing bodies have had a hand in the state’s ability to assess tax based on a nexus relationship:

• Constitutional Guidelines (namely the Due Process Clause of the 14th Amendment and the Commerce Clause);
• Federal laws – Public Law 86-272 (15 USC § 381);
• State laws; and,
• Case law

Assisting in the challenging implementation is the Multistate Tax  Commission (“MTC”)

more information (return to top)

• View a PDF of a Microsoft PowerPoint presentation on this subject conducted on June 16, 2010 in Washington D.C. to IHA’s Government Affairs Committee;
• View a PDF of practice guidelines established by the American Institute of Certified Public Accountants, including their checklists and tests to help steer you through this complex maze.