Diving into the ecommerce world is exciting, but sometimes the jargon can be a bit much. One term you’ll hear is “economic nexus.” Think of it like a signpost in the world of sales taxes, guiding businesses where they stand.
Here at TaxHero, we want to make things simple. We’ll break down this term, explain why it matters, and help you understand how it affects your ecommerce business. Ready to get started?
Economic nexus is a set of criteria determining if your ecommerce business has a significant presence in a particular state. This idea became well-known because of the South Dakota v. Wayfair case in 2018. If your ecommerce business meets these criteria, you must follow that state’s tax rules, which means collecting and remitting sales tax.
Simply put, if your ecommerce business has a notable footprint in a state – through sales, transactions, or physical presence – it triggers economic nexus in that jurisdiction.
The importance of understanding economic nexus in ecommerce lies in avoiding legal issues and planning finances wisely, helping you expand your business smoothly without unexpected tax problems. It acts as a guide to navigating potential tax obligations when entering new markets by ensuring compliance and strategic growth.
When establishing an economic nexus for your ecommerce business, states generally consider a few key factors. Here’s what you need to keep an eye on:
When managing an ecommerce business that spans across different states, it’s vital to be aware of the variations in economic nexus laws that exist from state to state. Here’s why it matters:
Each state sets its thresholds for establishing economic nexus based on sales revenue or transaction volume. It’s essential to be aware of these individual thresholds to remain compliant and avoid unnecessary complications.
Refer to the table below to find out the thresholds in each state:
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Not all states define economic nexus in the same way. Some focus more on sales revenue, while others prioritize transaction volumes or physical presence. Keeping tabs on these variations helps in strategizing your ecommerce business operations effectively.
Given the complexities, seeking advice from ecommerce sales tax professionals like TaxHero can be the best action. We can help you navigate the maze of state laws, ensuring your ecommerce business remains compliant and thrives.
Seasonal businesses are not exempt from these laws. It’s crucial to calculate your sales and transactions during your operational months accurately to comply with the respective state’s thresholds and criteria.
Economic nexus focuses on sales and transaction thresholds, whereas click-through and affiliate nexus revolve around relationships with affiliates in a state. Depending on your business model, you might need to comply with one or more nexus regulations.
Suppose you find out that you’ve established an economic nexus unknowingly. In that case, it’s recommended to consult with a tax expert promptly to understand the necessary steps for compliance and rectify any past discrepancies.
With all these regulations and variations, you’ll need a sales expert to check which states your business has established economic nexus. You can schedule a call with our CEO, who will personally onboard and explain how TaxHero conducts nexus checks.
Furthermore, we’ve got you covered with our comprehensive services, ensuring you understand the basics and adapt to state-specific laws. Let’s embark on this journey together for a successful and compliant ecommerce business adventure.
Drop shipping has become a hot trend in ecommerce, letting sellers run their businesses without stocking any inventory. While this model cuts down on upfront costs and enables you to focus on sales and customer service, it does come with its own challenges—especially regarding sales taxes.
Are you wondering how sales tax works in the world of drop shipping? This ultimate guide is here to help. We’ll break down the basics and give you the tools to handle your sales tax responsibilities like a pro.
Do you sell your products on marketplaces like Amazon, eBay, Facebook, and Instagram? Online shopping has boomed since the pandemic and has caused a rise in various online marketplaces and marketplace facilitators.
A marketplace facilitator is a business that forms contracts with third parties and sells any services or goods. You can understand a marketplace facilitator as a retailer, facilitating third-party sales of goods and services. They promote sales by listing products, keeping track of sales, and sometimes helping with the shipment. Amazon.com is a famous example where customers can discover and shop multiple products from different brands and sellers.
The marketplace facilitator contracts with businesses to facilitate retail sales. Marketplace sales are subject to sales tax regulations implemented under marketplace facilitator laws.
It can get complicated, especially with the legal compliance requirements and regulations. So, here we are, explaining what marketplace facilitators are and how they affect sales tax collection for sellers.
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Sales tax calculation is essential to financial transactions, whether you’re running a business or making personal purchases. Understanding how to calculate sales tax accurately is crucial to ensure proper budgeting and compliance with tax regulations. By utilizing a sales tax calculator and formula, individuals and businesses can swiftly determine the correct amount of sales tax to be paid, enabling them to make informed financial decisions and avoid any potential errors.
This blog will delve into the fundamentals of sales tax calculation, explore the formula for determining sales tax, and provide practical examples to illustrate its application in various scenarios.
Sales Tax Amount = Price of item x [State sales tax rate in decimals + Local sales tax rate in decimals]
A customer purchases a Vitamin C serum for $28. The order is placed to be shipped to Miami, Florida.
As of February 2025, Florida’s current state sales tax rate is 6%, the county sales tax rate (Miami-Dade County) is 1%, and the city’s sales tax rate (Miami Beach) is 0%. Therefore, the combined sales tax rate for 3120 Collins Avenue, ZIP code 33140 in Florida is 7.00%.
Are you a newly established ecommerce business owner looking to learn about the ins and outs of the sales tax? Then, understanding what sales is tax and how it works should be your utmost priority.
You’re probably intimidated by the amount of information you have to learn at once. But once you get the hang of it, with the help of TaxHero, you have nothing to worry about.
To easily understand, we have broken down below what you need to know about the topic.
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Suppose you are a new ecommerce business hoping to become successful by selling products to your customers. One of your main concerns is how to save money when buying the products or raw materials you need. That’s where the multijurisdiction resale certificate comes in handy.
With this certificate, you can purchase products without the additional hassle of paying sales tax, especially if your vendors are located in different states.
To learn more about how this certificate can help your business, read this article.
In the ever-evolving world of ecommerce, one term that continually pops up is “Sales Tax Nexus.” But what exactly is it, and why is it garnering so much attention? Grasping the ins and outs of nexus regulations is vital to building and running a successful venture.
This guide is designed to simplify this concept, spotlighting its critical role in today’s ecommerce environment. Together, we’ll navigate the essentials of managing compliance effectively, setting the stage for your business to thrive. Let’s start, shall we?
Sales tax is often the most talked about tax for US remote sellers. However, there are several other taxes that sellers may need clarification on. Tax compliance around remote sellers involves other taxes, such as use, excise, and value-added (VAT) taxes.
People often face difficulty differentiating them and consider them as the same thing. If you are one of them, this blog is for you. It discusses the difference between sales tax and other types of taxes.
Thanks to globalization and the World Wide Web, businesses can now sell their products across the United States and worldwide, leading to opportunities for growth. However, complying with various rules and regulations can be challenging. Fortunately, the Streamlined Sales Tax Program (SSTP) offers a solution.
Sales tax can be a complicated matter due to constantly evolving rules and requirements regarding its collection and remittance. To ensure businesses can properly understand and comply with these regulations, seeking professional assistance is often the best course of action.
The SSTP is an initiative by the state and local governments to reduce the complexity of tax collection for retailers. This article provides everything you need to know about Streamlined Sales Tax.
Sales tax is a crucial source of revenue for governments at different levels, and understanding what sales tax pays for is essential to comprehend public services and infrastructure funding. Sales taxes are vital in financing various aspects of society, including education, healthcare, transportation, public safety, and more.
Where does the collected sales tax go? What is sales tax used for? This blog sheds light on how paying sales tax improves communities and provides citizens with necessary resources.
Sales tax and Ecommerce go hand in hand. Whether you like it or not, you must pay sales tax as a customer. As a seller, you must collect and remit it unless you live in a state with no sales tax. In a 2020 Statista report, 35% of tax revenue collected by the US government was from sales tax.
Whether you are collecting sales tax using Shopify or another ecommerce platform, sellers always look for ways to simplify tax collection and management. Understanding the basics of sales tax to comply with relevant legal formalities and requirements is essential.
Here is the complete sales tax guide for ecommerce sellers with a step-by-step breakdown for Shopify stores and other online businesses. Let’s begin with the definition of sales tax.
The sales tax compliance process continues even after the collection and remittance of sales tax to the state. You must consistently improve your tax filing record to avoid penalties for unsatisfactory sales tax collections and remittances.
Knowing and remembering your sales tax due dates is essential to avoid penalties, as it can result in the revocation of your sales tax license. As mentioned, due dates and tax filing frequencies differ by state. If you conduct business in multiple states, keep track of all the due dates and filing frequencies separately.