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 Pennsylvania, 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 Pennsylvania or 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 Pennsylvania

1. Economic nexus in Pennsylvania

If you have made $100,000 of sales in Pennsylvania in the previous 12-month period, 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 Pennsylvania. Nexus has been created based on your volume of sales.

For more information see Pennsylvania Sales and Use Tax Bulletin 2019-01. 

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 Pennsylvania

The following creates physical presence nexus in Pennsylvania. If you have any of the following in Pennsylvania you need to get a sales tax permit:

1. Having or maintaining either directly or through a subsidiary, an office, distribution house, sales house, warehouse, service enterprise or other place of business irrespective of whether the place of business is located permanently or temporarily or authorized to do business within Pennsylvania.
2. Having or maintaining an agent of general or restrictive authority irrespective of whether the agent is located permanently or temporarily or authorized to do business within Pennsylvania.
3. Maintaining a stock of goods.
4. Regularly soliciting orders through a solicitor, salesman, agent or representative, whether or not the orders are accepted in Pennsylvania, or performing promotional activities in Pennsylvania.

For more information, please see Pennsylvania Dept of Revenue Answer ID 1212. 

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 Pennsylvania

1. Affiliate Nexus in Pennsylvania

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.

The following creates affiliate nexus between two businesses in Pennsylvania:

1. Affiliates, agents and/or independent contractors located in Pennsylvania who provide repair, delivery or other services relating to tangible personal property sold by the remote seller to Pennsylvania customers.
2. Affiliates, agents and/or independent contractors provide services in Pennsylvania that benefit, support and/or complement the remote seller’s business activity.
3. Storing its property or the property of a representative at a distribution or fulfillment center located in Pennsylvania.

For more information about affiliate nexus, see Sales and Use Tax Bulletin 2011-01.

2. Click-through Nexus in Pennsylvania

What is click-through nexus? Referrals from in-state entities may trigger nexus for an out-of-state company with click-through nexus. Out-of-state sellers of tangible personal property or taxable services are presumed to be engaged in business in Pennsylvania when:

1. “A remote seller who has a contractual relationship with an entity or individual physically located in Pennsylvania whose website has a link that encourages purchasers to place orders with the remote sellers. The in-state entity or individual receives consideration for the contractual relationship with the remote seller” or
2. “A remote seller who regularly solicits orders from Pennsylvania customers via the website of an entity or individual physically located in Pennsylvania, such as via click-through technology.”

For more information about click-through nexus, see Sales and Use Tax Bulletin 2011-01.

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

If you are an out-of-state online retailer who ONLY sells on approved marketplaces (such as Amazon, eBay, etc), Pennsylvania sales tax will be remitted by the marketplace on your behalf. However, as of the date of publication of this blog, the state has not yet released guidance on whether an online seller who ONLY sells on approved marketplaces is still required to get a sales tax permit even if no tax is due. Until the state releases more information, you may want to consider getting a sales tax permit in Pennsylvania, even if all of your sales are on approved marketplaces. 

For more information about this please see State Tax Summary July 2019.

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 Pennsylvania

How to File and Pay Sales Tax in Pennsylvania