All You Need to Know about Economic Nexus
For sellers who are selling their products and services out of state in the United States, economic nexus tax laws will apply for them. Economic nexus is the sales tax laws that make it mandatory for sellers from outside of the state to collect sales tax for their items if they have reached a certain annual threshold in sales.
For instance, a seller from Alabama might conduct businesses with customers in Arizona, which is the state that applies the threshold of $100,000 for its economic nexus laws. The Alabama seller will need to pay for the economic nexus tax to the state of Arizona when the seller reaches $100,000 in total sales for the current year. They will be eligible to collect sales tax from their customers in Arizona because they’ve reached the threshold in sales.
Other states might have different economic nexus laws, but sellers need to know the taxation laws in each state where they plan to conduct business. This is a mandatory rule for any seller doing business across states in the United States. Failure in following the taxation rules of economic nexus might put your business at risk of penalties, interests, and other applicable punishments by the local government.
Economic Nexus Applies Both for Digital and Physical Sales
The economic nexus laws are the ways states can boost their revenues from the businesses in the age of online commerce. Thus, it applies more to online sales conducted by businesses in various states in the United States. However, there are also instances where these taxation laws apply for physical sales or traditional brick-and-mortar stores. Each state will have their own economic nexus rules, and some states in the United States might not take part in this taxation scheme.
It’s the same whether you conduct business via online marketplace or by building your own brick-and-mortar store. The sales tax will be applicable when you reach a certain threshold as determined by each state. So, be aware of this taxation rule and price your products to follow these rules.
Benefits of Economic Nexus Laws
The economic nexus laws will provide multi-dimensional benefits for all concerned parties. Economic nexus laws will give benefits for the states, as they can earn more revenues from businesses conducted in their local jurisdictions. For businesses, they don’t need to worry about the nexus laws, as their sales tax payment comes from collecting additional payment from their customers. So, businesses won’t get less revenue from following the economic nexus laws.
The customers might need to pay more for the products and services they get from businesses where the economic nexus laws apply, but it would already be the norm for them, as there are plenty of businesses that collect the additional sales tax from their customers. They can also get benefits from getting various products and services from out-of-state sellers. Businesses can expand their reach further by reaching more customers out of state, providing them with the products and services that they need without having to worry about following complicated rules.
The economic nexus laws can also help states to grow more and more in various aspects, since the more businesses are operating in their states, the more revenues they can get. It doesn’t matter if these businesses have physical presence in their states or not. This is how economic nexus can support the growth of the states, as they grow together with the businesses that operate in their areas of jurisdiction, while allowing them to serve more customers.