Sales Tax Nexus
Businesses Selling Out of State Beware
Amy Jackson, JD
Historically, sales tax nexus was determined based on
the amount of physical connection an out-of-state seller
had with the state. Over time, some states have adopted
provisions that have blurred the lines regarding how
much physical presence is actually needed to trigger
nexus (e.g., Amazon laws).
A few states have further expanded their nexus
provisions to a standard that requires no physical
presence. This type of nexus is often referred to as
economic nexus. Under these new provisions, an out-
of-state seller is deemed to have substantial nexus as a
result of the economic benefits the seller receives in the
state (e.g., sales to customers located in the state). The
most recent states to enact an economic nexus standard
are Massachusetts and Wyoming.
New Directive Impacts Dealers with Sales in
Massachusetts
The Massachusetts Commissioner of Revenue has
issued a directive, No. 17-1, which explains the state’s
interpretation of its current nexus provision for sales and
use tax purposes. The directive became effective on
July 1, 2017.
The directive indicates that an out-of-state dealer is
presumed to have substantial nexus with Massachusetts
if the dealer has (1) 100 or more transactions and
(2) more than $500,000 of sales to Massachusetts
customers in the preceding 12 months.
New Legislation Impacts Dealers with Sales in Wyoming
Wyoming has recently passed legislation, Section 39-
15-501, which adopts an economic nexus provision
for sales and use tax purposes. This statute became
effective on July 1, 2017.
Under the new statute, an out-of-state dealer is
presumed to have substantial nexus with Wyoming if
A few states have further
expanded their nexus
provisions to a standard that
requires no physical presence.
(1) the dealer has more than $100,000 of sales to
Wyoming consumers in the preceding calendar year; or
(2) the dealer has more than 200 separate transactions
to Wyoming consumers in the preceding calendar year.
The legislation has a temporary injunction pending
litigation clause, which means that the Wyoming
Department of Revenue cannot enforce the provision
until there is a case decision regarding the validity of
the provision. It is unknown at this time if there are any
taxpayers willing to litigate this issue in Wyoming.
Other States’ Economic Nexus Provisions
Alabama, South Dakota, Tennessee, Vermont, and
Washington have also enacted similar economic nexus
provisions. Below is a summary for each state.
Alabama (Regulation: 810-6-2.90.03) – Effective:
Jan. 1, 2016; economic benefit threshold: $250,000 per
year based on previous calendar year.
South Dakota (Statute: Section 10-64-2) – Effective:
May 1, 2016, but there is a temporary injunction pending
litigation; economic benefit threshold: $100,000 in the
current or previous calendar year.
Tennessee (Regulation: 1320-05-01-.129) – Effective:
January 1, 2017; economic benefit threshold: $500,000
in the past 12 months; taxpayers were expected to be
registered for sales and use tax by March 1, 2017, and
begin collecting and remitting tax by July 1, 2017.
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