What is Sales Tax Nexus Anyway?

Your business owes sales tax in any state where it has “sales tax nexus”. In short, if you have sales tax nexus you need to collect and remit sales tax. If you don’t have sales tax nexus, you generally don’t need to get a permit. 

Sales tax nexus is a legal term that means you have crossed a threshold and now have a sales tax collection responsibility in the state. Nexus can be created by having a physical presence, economic presence, or by other factors.  Nexus rules vary by state and retailers have specific nexus rules based on where they have people, property or inventory.  

What Should You Do Once You Determine You Have Sales Tax Nexus?

Once you determine that you have sales tax nexus in New Jersey, your next step is to register for a sales tax permit in the state.  Check out our blog post on getting a sales tax permit in New Jersey for more information about that process.  If you are not interested in doing the work of getting the permit yourself, TaxValet can handle the permit registration for you with our Sales Tax Permit Registration Service.

Common Ways to Have Sales Tax Nexus in New Jersey

1. Economic nexus in New Jersey

If you had $100,000 or more retail sales or had 200 or more separate transactions in New Jersey in the previous or current calendar year, then you are required to register for, collect, and pay sales tax to the state. If you meet this threshold, it does not matter if you have a physical presence in New Jersey.  Nexus has been created based on your volume of sales.

For more information, please see Sales Tax Information for Remote Sellers (P.L. 2018,c. 132).

If you need help determining which states you have crossed economic nexus thresholds, check out our Sales Tax Starter Kit service.

2. Physical presence nexus in New Jersey

The following creates physical presence nexus in New Jersey. If you have any of the following in New Jersey, you will need to get a sales tax permit  and collect and remit sales tax:

1. Selling, leasing, or renting tangible personal property, specified digital products, or services;
2. Maintaining an office, distribution house, showroom, warehouse, service enterprise (e.g., restaurant, entertainment center, business center, etc.), or other place of business; 
3. Have employees, independent contractors, agents, or other representatives (including salespersons, consultants, customer representatives, service or repair technicians, instructors, delivery persons, and independent representatives or solicitors acting as agents of the business) working in the state;
4. Selling, storing, delivering, or transporting energy (natural gas or electricity) to users or customers;
5. Collecting initiation fees, membership fees, or dues for access to or use of health, fitness, athletic, sporting, or shopping club property or facilities;
6. Parking, storing, or garaging motor vehicles;
7. Delivering goods sold in a seller’s own vehicle.

For more information, see New Jersey TB-78R.

If you need help determining which states you have a physical presence in, check out our Sales Tax Starter Kit service.

Uncommon Ways to Have Sales Tax Nexus in New Jersey

1. Click-through nexus in New Jersey

What is click-through nexus? Referrals from in-state entities may trigger nexus for an out-of-state company. Click-through nexus may be established in New Jersey if all of the following conditions are met:

1. The seller enters into an agreement with a New Jersey independent contractor or other representative for compensation in exchange for referring customers via a link on its website, or otherwise, to the out-of-state seller; and
2. The seller has sales from these referrals to customers in New Jersey in excess of $10,000 for the prior four quarterly periods

Do You Need a Sales Tax Permit in New Jersey If You Only Sell on Marketplaces?

If you ONLY make sales through an approved marketplace (Amazon, eBay, etc), the marketplace is responsible for collecting and remitting the sales tax on your behalf. However, New Jersey still requires you to get a sales tax permit if you meet any of the nexus thresholds above (economic nexus, physical presence or click-through nexus). In this case, you would need a sales tax permit but you may request to be on a non-reporting basis as the marketplace is remitting the tax due. 

For more information, see Sales Tax Information for Remote Sellers (P.L. 2018,c. 132).

If you are an e-commerce seller who is unsure of where you need to get a sales tax permit, feel free to check out our Sales Tax Starter Kit service.

Related Blog Content

How to Register for a Sales Tax Permit in New Jersey

How to File and Pay Sales Tax in New Jersey