Economic nexus and exempt sales

Expect ongoing sales tax changes in 2020

Our 2020 sales tax changes report highlights how economic nexus laws dominated the sales tax landscape in 2019. One common misconception is that exempt sales aren't a factor when it comes to economic nexus. That isn't the case. Many states include exempt sales and services in their sales and/or transaction thresholds and it's critical to understand how exempt sales may impact your sales tax obligations.

What is economic nexus?

Economic nexus is a tax collection obligation imposed on companies based solely on a certain level of economic activity within a state. Unlike nexus that’s based on physical presence, economic nexus is based entirely on sales revenue, transaction volume, or a combination of both. Like many sales tax laws, economic nexus criteria vary by state and can be confusing. Review our state-by-state guide to economic nexus laws for the specific details on every state with an economic nexus law.

How states count exempt sales and services in their economic nexus laws

Complying with economic nexus and exempt sale requirements

As you can see from the map above, the majority of states include exempt sales and services in economic nexus thresholds. Assessing if and when you have obligations in more states is critical to maintaining compliance. Review our Five steps for managing sales tax resource to know and understand the steps necessary to first determine if you have a sales tax obligation then what to do after.  

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