A thorough nexus analysis can reveal hidden sales tax obligations that many businesses don’t even know they have—until a state audit shows up. With evolving economic thresholds, remote selling rules, and marketplace facilitator laws, it’s easier than ever to trigger nexus without realizing it.
This guide walks you through how to spot risks early, what triggers nexus in different states, and how to build a monitoring system that keeps you compliant. And if you need expert help to evaluate exposure or file where needed, HOST offers full-service nexus reviews, registrations, and strategic compliance support.
What Is Nexus Analysis?
Every business navigating multi-state sales needs to understand nexus—and knowing the difference between terms like “nexus,” “nexus study,” and “nexus analysis” is your first step. Let’s unpack the essentials.
Nexus vs. Nexus Study vs. Nexus Analysis
- Nexus refers to the legal connection between a business and a state that obligates you to collect and remit sales tax. Without nexus, that state can’t tax your business.
- A nexus study is a structured evaluation of your business activities—such as sales, inventory, or affiliations—to determine whether you have nexus in a given state. It gives you a clear map of your tax obligations.
- Nexus analysis is similar to a study but often implies a deeper, more ongoing process. It combines initial discovery with continuous monitoring and reassessment as your business evolves.
Types of Nexus
Understanding how nexus can be triggered is key to managing your compliance strategy. Core categories include:
- Physical Nexus: Established through tangible presence in a state—like owning or leasing property, having inventory in a warehouse, sending employees to a trade show, or maintaining an office.
- Economic Nexus: Triggered when sales or transaction volume in a state exceeds certain thresholds (e.g., $100,000 in sales or 200 transactions), regardless of physical presence. This standard emerged after the landmark Wayfair decision.
- Affiliate Nexus: Occurs when your business has a relationship—through shared ownership, branding, or representation—with an in-state affiliate that impacts tax obligations.
- Click-Through Nexus: A subtype of affiliate nexus. If in-state entities refer customers to you via a link (like affiliate marketing), and you pay them for those referrals, some states may consider that enough to trigger nexus.
Why Nexus Still Matters—Legal Shifts
Nexus isn’t just a tax buzzer—it’s a legal pivot point that determines whether your business must collect and remit sales tax in a given state. Here’s how shifting jurisprudence has transformed nexus—from being grounded in brick-and-mortar presence to being defined by digital connections.
From Quill to Wayfair: The Break with Physical Presence
For decades, physical presence—such as having a store, employees, or inventory in a state—was required to establish sales tax nexus. This standard originated with National Bellas Hess v. Illinois (1967) and later reaffirmed in Quill Corp. v. North Dakota (1992). These rulings barred states from compelling remote sellers to collect sales tax.
But in 2018, the U.S. Supreme Court overturned this model in South Dakota v. Wayfair, Inc., eliminating physical presence as a requirement. The ruling declared the Quill standard outdated in the digital age and opened the door for states to tax based on economic activity rather than location.
Rise of Economic Nexus & Evolving Thresholds
In the post-Wayfair landscape, almost every state now enforces economic nexus—triggered when you hit certain sales or transaction thresholds in that state.
Thresholds vary widely: some states enforce economic nexus with as little as $10,000 in annual sales, while others go up to $500,000. Notably, many states are now phasing out or have already eliminated the 200‑transaction threshold, simplifying compliance—but also raising risk for smaller sellers.
What This Shift Means for Your Business
The landscape has changed: you no longer need a warehouse or office in a state to be liable for sales tax. Instead, remote sales and virtual connections—like digital services, affiliate marketing, or marketplace selling—can establish nexus overnight.
This makes nexus analysis essential: ignoring your economic footprint or assuming physical absence protects you is not just risky—it could be costly.
Live Nexus Exposure Checklist
Before you find yourself surprised by unexpected state tax obligations, it’s vital to know exactly which business activities may create nexus—and trigger registration or filings. Here’s a sharp, easy-reference checklist to identify and monitor your exposure across U.S. territories.
Key Areas to Monitor
- Physical Presence
- Offices, storefronts, or warehouses located in another state
- Inventory stored in fulfillment centers (e.g., Amazon FBA locations)
- Employees, reps, or contractors (including remote workers) conducting business across state lines
- Remote Sales & Transaction Volume
- When sales exceed state thresholds (e.g., $100,000 or 200 transactions annually), economic nexus kicks in—even without physical presence
- Affiliate / Referral Arrangements
- Relationships with in-state affiliates (e.g., brand partners, referral agencies, sales agents) may trigger affiliate nexus—especially if they drive meaningful business
- Marketplace Sales Reporting
- Marketplace facilitator rules vary by state, and while platforms like Amazon may collect tax on your behalf, some states still require seller registration or mandate inclusion of these sales in nexus thresholds
Why It’s Critical
Traditionally, nexus required a physical presence—but modern nexus rules are broader and more nuanced. Physical, economic, affiliate, and marketplace triggers all carry real obligations. Together, they create a complex nexus landscape that demands active tracking to avoid violations.
What to Do Next
- Audit your footprint: Check for any business activity (presence, sales, affiliate relationships, marketplace listings) in each state.
- Implement an ongoing tracking system for changes in thresholds, inventory placement, or partnership shifts.
- Consider leveraging proactive tools or expert review to map out nexus risks accurately before they escalate.
Nexus Strategy: When It’s Smart—and When to Opt Out
Understanding nexus isn’t just about compliance—it’s a strategic decision. In this section, we’ll explore when establishing nexus can actually benefit your business—and how to avoid unnecessary entanglements.
When Intentional Nexus Works in Your Favor
Sometimes, choosing to establish nexus can unlock tangible business advantages:
- Resale Certificate Qualification
By registering for sales tax, you can secure resale certificates, which allow you to purchase inventory tax-free—boosting cash flow and simplifying compliance. This is especially useful for wholesalers or resellers operating across states.
- Access to Local Business Incentives
Some states offer tax credits, streamlined licensing, or vendor status only to businesses with tax presence. Nexus can help you leverage these incentives.
When Nexus Is Worth Avoiding
There are scenarios where opting out—or avoiding nexus—can save you complexity and costs:
- Minimal Sales Volume
If you’re just touching a threshold temporarily or only selling through marketplaces, registering might not be worthwhile. Zero-returns filings and admin overhead outweigh the benefits.
- Marketplace-Only Models
Some states allow marketplace facilitators to handle tax obligations. In such cases, registering your business may duplicate filings rather than ease them.
- Consolidated Sales Across States
If your business combines sales across channels or jurisdictions (through affiliates or marketplace aggregation), state-specific registration may not yield enough benefit to justify compliance costs.
Key Takeaways
- Use a strategic nexus analysis, not just threshold tracking, to assess whether registration brings operational or financial upside.
- When registering is a net cost—due to admin, filing burden, or marketplace overlaps—consider staying “off the radar.”
- But if resale efficiencies or compliance gains outweigh the hassle, intentional nexus can be your ally.
Industry Use-Cases & Nuances
Even within the broader topic of nexus, different business models face distinct challenges—and sometimes surprising traps. Here’s how nexus rules play out across key sectors, with nuance and real-world clarity.
SaaS & Digital Goods
Digital products often defy straightforward tax categorization. Some states treat SaaS as a taxable product; others classify it as a service—or even exempt it altogether.
As of early 2025, SaaS is taxable in 25 U.S. jurisdictions, but the rules vary significantly. Some states tax it if the software is delivered by access; others look at licensing vs. service agreements. For instance, Connecticut considers SaaS taxable if provided under a license agreement, but may exempt it under a service agreement when service is the primary purpose.
E-Commerce + FBA (Fulfillment by Amazon)
Inventory location matters—a lot. Storing goods in Amazon warehouses across states can create physical nexus, even if you’re not aware of the paths directing where goods land.
Most states consider inventory in FBA centers as nexus, triggering tax obligations. Sellers should track storage locations via Amazon’s inventory reports in Seller Central to manage exposure.
However, there are some exceptions. A Pennsylvania court ruled that mere FBA inventory does not create nexus under certain conditions—offering a limited but meaningful exception for some remote sellers.
Hybrid Sellers (Physical + Digital)
When your offerings span both tangible goods and digital services, nexus complexity deepens. You must assess nexus triggers across both categories and determine whether your combined presence crosses thresholds—physical or economic—or triggers market-specific rules like marketplace facilitator exemptions.
Why These Differ
- Digital nuances: Definition and taxability depend on software delivery method and agreement type.
- FBA exposure: Nexus suddenly becomes multi-state based on where Amazon stores inventory—often outside your visibility.
- Hybrid complexity: Mixed goods/services require dual-tracking of nexus exposure, threshold monitoring, and compliance strategy.
How HOST Simplifies Nexus Complexity Across 50 States
Sales tax nexus is one of the most confusing—and risky—areas of compliance for growing businesses. Between evolving thresholds, marketplace rules, and state-by-state differences, identifying where you owe tax isn’t straightforward. That’s where expert help becomes essential.
Nexus Analysis, Done Right
Hands Off Sales Tax (HOST) offers a dedicated nexus analysis service that pinpoints where your business has sales tax obligations—based on your operations, sales data, inventory footprint, and affiliate relationships. HOST’s team doesn’t just hand you a report—they walk you through the implications and help you decide where and when to register.
Whether you operate an online store, use Amazon FBA, sell SaaS, or manage hybrid channels, HOST tailors the nexus review to your business model and risk level.
Your One-Stop Compliance Partner
Beyond nexus analysis, HOST offers full-service support across the sales tax lifecycle:
- Multi-state registrations and renewals
- Ongoing filings (monthly, quarterly, annual)
- Economic nexus monitoring
- Resale certificate creation via ResaleCertify
- Tax matrix development
- Sales tax notice management and audit defense
- Marketplace and ERP integrations (Shopify, Amazon, Stripe)
- VDA support for past non-compliance
With over 25 years of experience, HOST gives you clarity, accuracy, and peace of mind—no matter how complex your sales footprint becomes.
Conclusion: Don’t Let Nexus Catch You Off Guard
Sales tax nexus isn’t just a compliance checkbox—it’s a moving target that can quietly expose your business to risk across dozens of states. But with the right analysis, ongoing monitoring, and expert support, you can stay ahead of every obligation.
HOST makes that possible. From in-depth nexus analysis to end-to-end compliance services, they help you uncover hidden risks, avoid unnecessary filings, and stay audit-ready at all times. If your business is scaling across state lines, now is the time to get proactive. Reach out to HOST and take control of your nexus exposure today.
Frequently Asked Questions (FAQs)
1. What is the difference between nexus and economic nexus?
Nexus refers to a business’s legal obligation to collect and remit sales tax in a state. Economic nexus specifically arises when a business exceeds certain revenue or transaction thresholds in a state—typically $100,000 in sales or 200 transactions.
2. How do I know if I have nexus in a state?
You’ll need to analyze your business activities—physical presence, inventory locations, employee or contractor presence, affiliate relationships, and sales volume—to determine where nexus exists. A proper nexus analysis evaluates all these factors.
3. Can using Amazon FBA create nexus?
Yes. Inventory stored in Amazon fulfillment centers (FBA) creates physical nexus in those states, even if your business has no other presence there. This can trigger sales tax registration and filing obligations.
4. What happens if I ignore nexus obligations?
Ignoring nexus can lead to back taxes, penalties, interest, and audits. Some states may pursue multi-year liabilities if you failed to register once nexus was established.
5. Can I eliminate nexus once it’s triggered?
In most cases, no. Once nexus is created—especially physical nexus—it generally continues as long as the qualifying activity exists. However, some economic nexus thresholds reset annually and may lapse if you fall below them.
