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What is a “sales tax nexus” in Nevada business law?

On Behalf of | Nov 8, 2017 | Business Law

Doing business is different now than it was 50, or even 30, years ago. While one could point to any number of reasons why this is so, it is unlikely anyone would be surprised by the biggest change: the invention of the internet. If one were running a retail store in Nevada in the 80s, for instance, it would be pretty easy to determine where the goods from the store were sold. That is, with the exception of certain mail-order catalogues, one’s goods were likely stored in Nevada, and sold in Nevada. Thus, it was fairly easy to know when a business had to collect sales tax for the state.

Turning to the 21st century, things have changed. A retail business incorporated in Nevada may not even have a physical location in the state. All sales may be made through the internet, and it is quite possible that the goods are manufactured, stored and shipped somewhere else. So, when would a Nevada corporation have to collect state sales tax? The answer is when that business has a “nexus” to the state.

The term “nexus” basically refers to a physical connection or tie to the state. Generally, to have a nexus for the purposes of having to collect sales tax, the business needs to have a physical presence in the state. A store front would obviously qualify, but so too might selling a physical good to someone in Nevada, or having goods housed in the state, even if they are being sold elsewhere. This may be true even if the business utilizes third party warehousing and shipping operations, such as Amazon. If the goods the business is selling are being stored in Nevada, there may be a tax nexus created.

The creation of a sales tax nexus may be a complicated topic. In the future, there may even be a question of whether sales made through an internet connection in the state by a third party creates such a nexus, though that does not appear to be the case yet. Every business law situation is unique and will depend on the facts as they apply to the specific commercial venture.

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