nexus reference

nexus = the connection between your business and a tax jurisdiction that triggers an obligation to collect and remit tax.

types

  • physical nexus: you have a physical presence (office, warehouse, employee) in the jurisdiction. the old rule.
  • economic nexus: you hit a sales threshold in the jurisdiction. no physical presence needed. the new rule (US, since 2018).

US economic nexus

in 2018 the Supreme Court ruled (South Dakota v. Wayfair) that states can require tax collection from out-of-state sellers based on sales volume alone.

common thresholds:

  • $100,000 in sales OR 200 transactions in a state (most states)
  • some states use $500,000 (e.g., California, Texas)
  • some states dropped the transaction count test, only revenue matters
  • thresholds are per state, measured annually or trailing 12 months

once you cross a threshold in a state:

  • register for a sales tax permit in that state
  • start collecting sales tax from customers in that state
  • file returns (monthly, quarterly, or annually depending on volume)
  • remit collected tax to the state

SaaS taxability varies by state. SaaS is taxable in about 25 states, not taxable in others. you only need to register in states where your product is actually taxable AND you've crossed the threshold.

EU and UK: no nexus concept

for non-EU businesses selling digital services to EU/UK consumers, there's no threshold. you owe VAT from the first sale.

  • EU: register for OSS (One Stop Shop) in one country, covers all 27. rates 15-27% by country.
  • UK: register with HMRC. 20% flat rate. £0 threshold for non-UK sellers.

this is simpler than the US in one way (no threshold tracking) and harder in another (you must comply immediately).

comparison

                    US                          EU/UK
threshold           $100k-500k per state        €0 / £0 (no threshold)
when to register    after crossing threshold    before first sale
jurisdictions       50 states, 11,000+ rates    27 EU countries + UK
rates               0-10%, varies by address    15-27%, flat per country
input credits       no                          yes (claim VAT on purchases)
filing              per state                   one OSS return (EU) + one UK return

monitoring

track your sales by jurisdiction so you know when you're approaching a US threshold. for EU/UK, no monitoring needed - you register once and file quarterly.

Version 2 · Created Feb 16, 2026 · Modified Jul 20, 2026
chatgpt claude