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IMA Tax Policy Blog

Wayfair: Ways to Create Sales Tax Nexus

by Tom Brown

DHJJ is an IMA B2B Partner

A year has passed since South Dakota v Wayfair, and many states have shifted their focus on enacting economic nexus standards for sales tax yet there are a lot of other ways to create sales tax nexus. The Wayfair decision resulted in nexus standards addressing out-of-state remote sellers. There are still a variety of ways in which a seller can generate nexus with a physical presence in another state. This includes activities such as delivery via seller’s vehicle, personnel, storage of tangible goods, trade show appearances, and drop shipments.

Common Ways to Create Sales Tax Nexus

Delivery in Seller’s Vehicle

Physical presence can be established if your business utilizes its own fleet of delivery vehicles to deliver tangible personal property to your customers. If so, your business has nexus in that state.


Employing or contracting an outside salesperson in another state can be a means of establishing a presence in the state. Hiring an employee that performs work for your company in another state can also result in sales tax nexus with another state. Likewise, hiring a subcontractor in another state to do work in that state on behalf of your business creates nexus.


If you own or rent a warehouse in another state and utilize that space to store inventory, your business might be subject to sales tax registration and filing. Housing inventory or assets in a company’s warehouse or location in another state can also create nexus, which includes equipment owned by you and rented to another company or inventory on consignment stored by another company for fulfillment.

Trade Shows

If your business attends trade shows and makes sales, those sales could be subject to sales tax. If employees travel out of state to participate in a trade show and sales are made at the trade show, it could create a nexus relationship. Some states do allow a temporary license for the few days they will be attending the trade show.

Drop Shipments

A drop shipment is a shipment of a tangible good from a supplier directly to the purchaser’s customer (end-user) that is fulfilled by the supplier’s vendor. These sales are also known as third-party sales because there are three parties involved: 1) Supplier, 2) Supplier’s vendor, and 3) End-User.

Drop shipments are examined as two transactions:

  1. Purchaser buys tangible goods supplier, and
  2. Purchaser sells tangible goods to end-user and has the order shipped directly from the supplier.

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