Answer:
It’s a great question! It can be confusing when you see that you might need to register and file taxes even if your products aren’t taxable. Here’s a simple explanation:
What is "Nexus"?
"Nexus" is a legal term that refers to a connection or link between a business and a state. In sales tax terms, it means your business has enough of a presence in a state that the state can require you to register and file sales tax returns.
Nexus and Non-Taxable Products
Even if your products are not taxable, you can still create Nexus in a state. This usually happens when your sales in that state exceed a certain threshold (a specific amount of sales or transactions).
Example:
Let's say you sold over $100,000 worth of non-taxable products in Georgia last year. Even though those sales weren't taxed, you still triggered Nexus in Georgia. This means you're required to register with the state and file sales tax returns, even if those returns show that you didn't collect any sales tax.
Why is this necessary?
States require businesses to register and file, even for non-taxable sales above the Nexus threshold, because they want to keep track of business activity within their borders. Filing allows you to report your sales activity to the government.
Where to Find More Information
Our platform has a tool guide that explains the basic tax rules for each state. Please check this guide for more specific information about Nexus thresholds and filing requirements in the states where you do business.