Sales-tax nexus
What is Sales-tax nexus? The link between a seller and a US state, such as a shop or warehouse there or enough sales into it, that means the seller must collect and file that state's sales tax.
In plain words
in the United States, sales tax belongs to each state. You collect and file it only in the states where you have a connection, called nexus.
A connection can be physical, such as an office, a warehouse, staff or stock in the state. It can also be economic, meaning your sales into the state pass a threshold that the state sets.
A worked example
| State | Your sales in the year | Nexus? |
|---|---|---|
| Home state (you have a warehouse) | $400,000 | Yes, physical presence |
| State B (no office) | $130,000 | Yes, if its threshold is $100,000 |
| State C (no office) | $40,000 | No, below the same threshold |
Each state sets its own threshold and its own rules, so the $100,000 figure is only for illustration. Confirm each state with your tax adviser.
Why it matters
- Cost. Tax you should have collected but did not becomes your own cost, usually with interest and penalties.
- Deadline. You acquire the obligation by selling, without any paperwork, so it is often found years later.
- Risk. Each state has its own form, its own filing calendar and its own registration.
How Kinnow handles it
The United States edition is from early 2027, with basic support in place.
- Sales by state. Kinnow records which state each sale is sourced to and the tax collected.
- A summary per state. For a period it gives taxable sales, exempt sales and tax collected for each state with activity, for you to copy into that state's own return. It warns if some taxable sales carry no state. There is no federal sales-tax return.
- Permits tracked. The state sales-tax permit is one of the registrations Kinnow can track for you.
- No input credit. Sales tax is single-stage, so tax paid on your own purchases is a cost and is not netted.
The honest limit. Kinnow does not decide where you have nexus. A state appearing in the summary does not mean a return is owed there. Rates below state level, such as county and city, are not included. US payroll is not in the first release.
Selling into several states? Send us a year of sales by state and we will show the summary.
Related terms
- GST: India's tax, charged at every stage with credit for tax paid.
- Input tax credit: how a multi-stage tax gives credit.
- Making Tax Digital: the UK's digital VAT rule.
Questions
Do I need to collect sales tax in a state where I have no office?
Possibly. If your sales into the state pass its economic threshold, you may have nexus without any physical presence. Check the state's rules or ask your tax adviser.
Can I claim back sales tax on my purchases like GST credit?
Generally no. Sales tax is charged once, at the final sale. Purchases you resell are usually bought without tax using a resale certificate. Ask your adviser how this applies to you.
Does Kinnow tell me where I have nexus?
No. It shows your sales and tax collected by state. Whether you must register in a state is a decision for your tax adviser.
Request a demo to see your sales by state, ready for your adviser.