How To | Start your online business: Nexus.

Information shared is based on personal experience. Helpful links will be provided at the end of all content. Be sure to research out to individuals that work in the field. Contact information can normally be found on your state revenue page.

Each state has a sale nexus, we will discuss what is a sales nexus, why it's needed, and when to apply. Many people talk about a sales nexus, but when I did research it was a little hard to understand. In the simplest way, I will help with getting the general information on its importance.

What is a nexus ?

A nexus allows a business to legally operate and tax individuals. In general, a nexus is an agreement between a business and itself, saying the business will tax the appropriate taxes and file.

Why is it needed ?

At the beginning of sales especially if you are a small business you will not need a nexus for every state. If your state has sales tax then in a sense you already have a nexus for that state. Each state has a threshold. The threshold simply states how much a business should be making or the number of transactions they should have in order to apply for a nexus. Once a nexus is received then legally the business is responsible for not only applying taxes to individuals but filing as well. The thresholds have changed from time to time, so once your business starts generating revenue it is best to check in to find out when to apply.

When to apply ?

As we just discussed each state has a threshold when you will need to apply for a nexus. They also give a deadline on when your business needs to register before the business gets into any potential trouble for operating illegally. Most deadlines are the current or previous calendar year or have a specific deadline. For instance, if your business is an online shop in California and has clientele in North Carolina, you’re considered a remote seller. Remote sellers who start to exceed $100,000 or 200 or more transactions are required to file for a nexus.

Now that we have discussed the nexus let's talk about taxes.

There are a few ways you can tax a person: zip code or county. The best way to apply taxes is by county. Going by the zip code can potentially raise problems. There are a few zip codes that share cities. Most likely if it is not the same city the taxes will be different. For this reason, it is best to tax by the county. If you are only selling in one state then this will not be a problem. If you plan on selling in multiple states this can raise an issue further down the line. When going to e-commerce platform websites to find out what they offer, they will not say whether or not they offer taxing based on zip code or county. However, a quick fix is by emailing them, in general, they will have no problem in saying how their system works with taxing.

There are a few other things one should know about taxes. Avalara will be able to help with understanding the origin and destination sales tax. They also keep sales tax by county for each state up to date. There is a lot to cover and understand when dealing with collecting, remitting/using, and filing taxes. The sources below should be able to guide you further in your journey.

Helpful Resources:

Starting a Business in North Carolina - Free Small Business Resources (edpnc.com)

NC.gov: How to Start a Business in NC

Zenbusiness.com

Legalzoom.com

NCDOR: Remote Sales

Origin vs. Destination Sales Tax - Avalara

Sales tax calculator and rate lookup - Avalara