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 Tennessee, 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 Tennessee 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 Tennessee

1. Economic nexus in Tennessee

If you have made $500,000 of sales into Tennessee in the previous twelve (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 Tennessee.  Nexus has been created based on your volume of sales.

For more information see Tenn. Comp. R. & Regs. R. 1320-05-01-.129.

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 Tennessee

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

1. An office, distribution point, salesroom, warehouse, or any other temporary or permanent place of business in Tennessee.
2. An agent, salesperson, canvasser, or solicitor operating in Tennessee for the purpose of making sales or taking orders for sales. 
3. Furnish any property or services subject to the sales or use tax while in Tennessee.
4. Lessors of tangible personal property located in Tennessee.
5. Construction contractors performing jobs in Tennessee. 
6. Make deliveries in a company vehicle to Tennessee. 
7. Any other physical presence in Tennessee.  
8. Make repairs in Tennessee. 

For more information, please see TN Sales and Use Tax Guide. 

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 Tennessee

1. Click-through Nexus in Tennessee

What is click-through nexus? Referrals from in-state entities may trigger nexus for an out-of-state company with click-through nexus. A dealer is presumed to have a representative, agent, salesperson, canvasser, or solicitor operating in Tennessee for the purpose of making sales and is presumed to have a substantial nexus with this state if:

1. The dealer enters into an agreement or contract with one or more persons located in Tennessee under which the person, for a commission or other consideration directly or indirectly refers potential customers to the dealer, whether by a link on an Internet web site or any other means; and
2. The dealer’s cumulative gross receipts from retail sales made by the dealer to customers in Tennessee who are referred to the dealer by all residents with this type of an agreement with the dealer exceed ten thousand dollars ($10,000) during the preceding twelve (12) months.

For more information about Tennessee click-through nexus, see PC No 514-Section 27.

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

As of the publication of this blog, Tennessee is not a marketplace collection state. Therefore, you are responsible for collecting and remitting sales tax on all sales made on marketplace channels if you meet any of the nexus requirements in Tennessee. There is currently legislation pending in Tennessee regarding marketplace collection requirements.  

For more information about this please see TN Sales and Use Tax Notice June 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 Tennessee

How to File and Pay Sales Tax in Tennessee