Tax nexus is a connection that creates a tax collection obligation in a state or country.
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Tax nexus is a connection between a business and a tax jurisdiction that creates a legal obligation to collect and remit taxes in that jurisdiction.
A business can create nexus through activities such as:
Having a physical location (store, office, or warehouse)
Storing inventory in a state or country
Having employees or contractors in a jurisdiction
Reaching certain sales thresholds (economic nexus)
Conducting other business activities that trigger tax obligations
For example, if an ecommerce business exceeds a state’s sales threshold, it may establish economic nexus and be required to register, collect sales tax from customers in that state, and remit the tax to the state tax authority.
In Shopify, determining where you have tax nexus is the first step before registering for taxes and configuring tax collection in Settings → Taxes and duties.