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How Does Economic Nexus Affect Your Online Sales?

Economic nexus laws apply in almost all states in the United States as a means for the states to increase their revenues from the businesses operating in their areas of jurisdiction. It is important for the government to create a way for them to apply taxes from the sales happening in their states, because most businesses in the United States today operate through online marketplaces, and they conduct businesses with customers from other states as well. This way, online businesses will need to pay taxes for the products and services sold in various states in the United States, acting as just one of the many aspects of submitting your self-employed taxes for your business. Check out this guide to economic nexus here to know how the tax applies for your online business.

However, you need to understand that the economic nexus laws won’t apply to your business unless you’ve reached a certain threshold for your transactions. Yes, some states will apply the economic nexus laws with no threshold, meaning that no matter how big or small your transaction in that state, you will still have to pay the sales tax to the states. Other states in the United States will apply a certain threshold before they can make you eligible for paying the sales tax under the economic nexus laws.

Will Economic Nexus Laws Affect Your Online Sales?

The economic nexus will require you to collect sales tax for the products and services you sell in other states after you reach a certain threshold in your transaction. This threshold will apply each year. So, for instance, if a state requires a threshold of 200 transactions before they can apply the economic nexus laws on your business, it means that you have to reach 200 transactions in a year before you can collect sales tax for your products and services. Remember, each state will apply different thresholds for the economic nexus laws, so you need to check them with the local authorities.

Will it affect your online sales? Yes, it will affect your online sales, more or less. The reason is that you will require your customers to pay more for your products and services, since you will add the sales tax payment to your product pricing.

For some customers, more expensive products mean no buy for them. So, yes, you might lose some customers because they want to find cheaper products or services they can use. However, because the amount of sales tax is quite small, many customers won’t mind paying more for your products and services. After all, it is the norm for businesses to apply sales tax for their products and services in their state.

So, What Should You Do as a Seller?

If you operate your business online, and you need to do business with customers from other states, you might need to let them know beforehand that they have to pay for the sales tax of your product, since it is the rules in their state. You also need to keep yourself informed about the current economic nexus laws applicable to the state where your business is operating.

Remember, some states in the United States don’t apply any economic nexus laws, so you are free from collecting any sales tax in those states. But most states have a kind of economic nexus rules that any business needs to follow. Since you are conducting business in their states, you still need to follow their rules if you want to keep the smooth operations of your business.


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