New York Sales and Use Tax: Nexus Generally – “Jurisdiction” to Tax

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January 02, 2014

A. Not every taxpayer engaging in business activities within the United States is subject to taxation by the 50 different states.

B. In order to promote a national economy, the U.S. Constitution imposes limitations on the various states’ abilities to tax an out-of-state business.

C. Before a state can tax an out-of-state business, that business must first have “nexus” with the taxing state.

D. Dictionaries define “nexus” as a “connection” or “link.”

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E. Nexus refers to the nature and frequency of contacts that an out-of-state business must establish within a taxing jurisdiction before it will be subject to taxation by that jurisdiction.

F. In short, “nexus” is the minimal level of contact required before a state can impose tax.

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