Resources

Nexus is the legal relationship between your business and a U.S. state and that is what determines whether you are required to collect and pay sales tax in that state.

They are two kinds:

Physical Nexus

You actually live in one state, such as a U.S. office, employee, warehouse or contractor. That engages taxation in that state.

Economic Nexus

You may pay taxes even though you are not physically present.

When you make sales to end users in a U.S. state above a threshold amount (e.g. the gross revenue of $100,000 or 200 transactions per year), you will have economic nexus in that state -and you have to register, collect and remit sales tax.

Why

Every state has different rules, thresholds, and filing. Failure to comply with nexus may attract fines, audit, and interest on the unpaid taxes even years after.

After you decide to have nexus in a U.S. state, you have to on a legal basis to:

Register for Permit

In the particular state, you have to obtain a sales tax permit before you can collect any type of tax. Non-registration collecting is prohibited.

Retain Sales Tax

After registering, you should start charging the right amount of sales tax at the point of sale depending on the location of the buyer and local taxes.

File Regular Sales Tax Returns

Each state has a different frequency of filing- monthly, quarterly, or annually, based on sales volume. You ought to report:

Total sales

Taxable sales

Tax collected

And pay the owed amount

Monitor State-level Deadlines

Failing to file on a timely basis – even accidentally – may mean paying late fees, interest, or even audits. As more than 45 states collect sales tax, it becomes involved very quickly to do so manually via filing.

Tip: The automation tools and professional assistance, such as TaxSwift, will help you stay updated.

Sales tax compliance is not an optional activity; it is a must-have activity in the case of Global startups that are selling to customers in the U.S. Here’s why:

Penalty Avoidance and Audits

Failing to register, collect, or file sales tax on time can trigger hefty fines, interest, and audits from U.S. state tax departments — even years after the sale.

Enable Scalable Growth

U.S. investors, partners, and payment processors increasingly expect compliance from startups they work with. Staying compliant builds credibility and trust.

Stay Ahead of Complex Rules

Each U.S. state has its own tax laws, thresholds, and deadlines. As you grow, your tax exposure spreads across more states — making proactive compliance critical.

Keep Operations Clean and Fundable

Non-compliance can show up during due diligence or exits. Clean tax records signal that your business is ready for funding, acquisition, or expansion.