What is nexus?

A business is required to collect and pay taxes in a state where it has nexus. Nexus is created when a business has a sufficient connection to a state, allowing the state to require the business to collect and remit taxes. Physical presence will always create nexus, so a business will likely have nexus in a state where it has any of the following:

• A building such as an office, warehouse, or showroom
• Employees or representatives
• Inventory stored at a third party warehouse such as Amazon
• In-state affiliate
• Temporary physical business activity such as a trade show

Businesses can also have economic nexus. After the Supreme Court's decision in South Dakota v. Wayfair, generating a certain amount of revenue or completing a certain number of transactions within a state will create nexus. Sovos maintains a list of the economic nexus requirements for each state: South Dakota v. Wayfair Economic Nexus Threshold Table.

Whenever a business reaches the threshold, nexus is triggered and the business may be required to collect and remit taxes in that specific state. As economic nexus rules are constantly changing, it is important to check the requirements often to make sure your business is compliant.

Do I have to collect taxes in all states I do business in?

It depends on the state. States with sales tax requirements will want you to collect and remit taxes if you have physical or economic nexus.

There are five states that do not have state sales tax requirements, often called the NOMAD states: New Hampshire, Oregon, Montana, Alaska, and Delaware. However, Delaware and Oregon have transaction tax for a small portion of transactions, while Alaska has local-level sales tax and economic nexus rules.

When do I need to register in a state?

If you have nexus in a state you are doing business in, you need to register for a sales tax permit, also known as a sales tax license before you start collecting and remitting sales tax in the state.

What is the registration process like?

The process and the cost of registering for a sales tax permit are different in every state and may also be influenced by the type of business you have. To find out whether you are required to register and what you need to do in order to get a sales permit, visit the state tax authority's website for your home state and every other state where you do business or where you are planning to do business.

Registration for CSP-compensated sellers (previously referred to as volunteer sellers) in SSUTA states

I have already registered as a CSP-compensated seller in SSUTA states before I started using Sovos

You can continue to file on your own if that is what you prefer. You can also choose to use Sovos as your Certified Service Provider (CSP), in which case Sovos will indicate in the SST Registration System (SSTRS) that Sovos will now be filing and remitting on your behalf as your CSP.

I am a Sovos customer and want to register now with Sovos as my CSP

If you qualify as a CSP-compensated seller after becoming a Sovos customer, Sovos can complete the registration for you and get registered as your CSP all at the same time.

I am registered with another CSP and I am moving to Sovos

Your former CSP will need to submit a CSP End Services registration change through the SSTRS. When that is complete, Sovos can then submit a Start Managing Existing Registration change through SSTRS.

I want to register but I am not planning to use a CSP

Register in the Streamlined Sales Tax Registration System (SSTRS).