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 York, 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 York 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 York

1. Economic nexus in New York

If you had $500,000 or more retail sales AND had 100 or more separate transactions in New York in the immediately preceding four sales tax quarters, 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 York.  Nexus has been created based on your volume of sales.

For more information, please see New York Department of Taxation and Finance.

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 York

Whether you operate from a store or sell goods or services from your home, over the Internet, from a cart, or at a craft fair, you will need to register for sales tax if you are considered to be a vendor. A vendor sells tangible personal property or services that are subject to sales tax.  If you meet any of the following conditions, you are considered a vendor in the state of New York:

1. You solicit business in New York State through employees, independent contractors, agents, or other representatives, and through these persons, sell taxable, tangible personal property or services in New York State; or
2. You solicit business through catalogs or other advertising material and have some additional connection with the state, and through the catalogs, you sell taxable, tangible personal property or services; or
3. You make sales of taxable products to customers within New York State, and regularly (at least 12 times a year) deliver the products in your own vehicles.

For more information, see Tax Bulletin ST-175.

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 York

1. Affiliate Nexus in New York

What exactly is affiliate nexus? Affiliate nexus can exist when a business has sufficient contact with a state through a separate business. If your out-of-state business has a relationship with an in-state business, then you may have affiliate nexus. 

Please keep in mind that an “affiliated business” does not necessarily mean that it is a marketing “affiliate” in the typical sense of the word. Instead, “affiliate nexus” refers to the relationship between two businesses.

You may have affiliate nexus if your business has ties to a business in New York that engages in any of the following:

1. A New York affiliate who is a sales tax vendor uses a trademark, service mark, or trade name in New York that is the same as that used in New York by the remote affiliate.
2. A New York affiliate engages in activities in New York that benefit the remote affiliate in its development or maintenance of a market for its goods or services in New York.

For more information about affiliate nexus, see  New York Dept. of Taxation and Finance TSB-M-09(3)S.

2. Click-through Nexus in New York

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 York if all of the following conditions are met: 

1. If the seller enters into an agreement with a resident of the state under which the resident, for a commission or other consideration, directly or indirectly refers potential customers, whether by a link on an internet website or otherwise, to the seller.
2. If the cumulative gross receipts from sales by the seller to customers in the state who are referred to the seller by all residents with this type of an agreement with the seller is in excess of $10,000 during the preceding four quarterly periods, ending in February, May, August, and November. 

For more information about click-through Nexus, see New York 1101(B)(vi).

Do You Need a Sales Tax Permit in New York 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 to the state of New York on your behalf. However, if you meet any of the thresholds above, New York still requires you to get a sales tax permit (called a Certificate of Authority) and remit returns even if you have no tax due. 

For more information, see  FAQ’s Related to Registration Requirements for Businesses with No Physical Presence in NYS.

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 York

How to File and Pay Sales Tax in New York