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, an 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 Washington, D.C., your next step is to register for a sales tax permit in the state.  Check out our blog post on how to get a sales tax permit in Washington, D.C. 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 Washington, D.C.

1. Economic nexus in Washington, D.C.

If you made $100,000 of sales into Washington, D.C. or 200 transactions in the previous 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 Washington, D.C.  Nexus has been created based on your volume of sales. For more information, please see the Internet Sales Tax Amendment Act of 2018 put out by the District. 

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

2. Physical presence in Washington, D.C.

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

1. An office or place of business such as a retail store. 
2. A warehouse or inventory stored in the state. 
3. Employees or independent contractors in the state making sales. 

You can read more about physical nexus in Washington, D.C. in the Code of the District of Columbia SS47-2201.

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

Do You Need a Sales Tax Permit in Washington, D.C. If You Only Sell on Marketplaces?

If you are an online retailer who ONLY sells on approved marketplaces (such as Amazon, eBay, etc), Washington, D.C. sales tax will be remitted by the marketplace. However, as of October 2019, Washington D.C. has not specified whether a marketplace only seller is still required to get a sales tax permit. Until they release official guidance, you might consider getting a sales tax permit in Washington D.C., even if you only sell via marketplace facilitators. 

If you are an e-commerce seller who is unsure of where you need to get a sales tax permit, check out our Sales Tax Starter Kit service. In fact, if at any point you are stuck and want a team of experts to handle all of this for you, don’t hesitate to contact us.

Related Blog Content

How to Register for a Sales Tax Permit in Washington, D.C.

How to File and Pay Sales Tax in Washington, D.C.