Sales Tax 101

Sales Tax by State: Does a salesperson in a state give you sales tax nexus?

by Mark Faggiano

Sales Tax Nexus

TaxJar has written frequently on the subject of nexus and what circumstances give you nexus in different states. These can range from having an office or a warehouse in a state to having delivery vehicles or storing goods in an Amazon Fulfillment Center. But what if you hire your sister in Florida to be a salesperson, does that give you nexus? The short answer is yes. In nearly every state having a salesperson, either an independent sales agent or an employee making sales, qualifies as nexus in that state and you will owe sales tax.

Are there any exceptions?

Yes, there are a few exceptions to this rule. For this, we will separate the exceptions into two categories, independent sales agents and employees making sales.

Independent Sales Agents

  • New Jersey- New Jersey is the only state that has a caveat for independent sales agents. According to their nexus law, it doesn’t matter the number of independent agents that you have working in the state, if they, either alone or combined, make more than $10,000 in sales over the previous four quarterly periods, then you have nexus.

So let’s say for example, you have one independent sales agent that makes $9,500 in sales, you wouldn’t charge sales tax on those sales. However, if you have three independent sales agents that each make $5,000, then you would have nexus and owe sales tax. This is because those totals combined equal $15,000.

Employees Making Sales

There are several states that have different rules or exceptions when it comes to employees that are making sales.

  • Arizona – Arizona stipulates that you have nexus in the state if your employee is present in Arizona more than two days a year.
  • Georgia – Georgia has a rule that states that ‘dealers’ or employees who only engage in trade show activities for 5 days or fewer during a 12 month period and who earn no more than 100,000 of net income in the state during the prior year are excluded from the nexus definition.
  • Washington -Washington states that an employee’s visits to the state to make wholesale sales are excluded from their definition of nexus, if the goods never enter the Washington marketplace, but are instead delivered outside of the state for retail sale.

As always if you are not sure if you have nexus in your state, please contact your state’s department of revenue or other taxing authority or a reputable sales tax expert to learn more. You can also check out additional resources on nexus, collecting and remitting sales tax, and sales tax rates by locality on TaxJar.

Still have questions or know any additional rules about nexus? Tell us in the comments.

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