nexus
The connection that lets a state tax a business.
The connection between a taxpayer and a jurisdiction sufficient to establish taxing authority.
What that means in practice
A state cannot tax a company that has nothing to do with it. Nexus is the link — an office, staff, or nowadays simply enough sales into the state — that gives it the right. It is why online sellers now collect sales tax almost everywhere.
Nexus was historically physical, requiring presence in the state; economic nexus standards now permit assertion on sales volume or transaction count alone. ⚠️ The shift substantially expanded remote-seller collection obligations and correspondingly reduced the residual use tax base.
Questions people ask
Is this a rule, or just a way of describing something?
It is a way of understanding the system, not a rule in it. nexus has no rate. It explains how the rules that do have rates fit together.
Is this one of those terms that needs three other terms to explain it?
Not really. nexus is fairly self-contained. You can understand it without first learning a chain of other definitions. That makes it a good place to start if the rest of the vocabulary is new.
Is this the standard name for it?
It is. nexus is the name this rule generally goes by. Searching it will find what you expect. That is not true of every tax term — some carry three names, depending on who is writing.
Is this a statutory term or an analytical one?
This is an analytical or procedural concept rather than a rate-bearing statutory provision. It applies across levels of government and tax types, and is used to interpret provisions that do carry rates rather than imposing liability itself.
Does this term resolve independently?
This term resolves largely independently of other defined terms, with limited cross-references. It is therefore usable as an entry point; more heavily cross-referenced provisions generally require it rather than the reverse.
Is this designation the settled one?
This designation is the settled term of art with limited alternative usage, so it maps reliably to statutory and agency references. Terms with multiple colloquial designations require more care when searching source material.