Wayfair: Ways to Create Sales Tax Nexus

By Tom Brown

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. Activities include 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 in that 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 temporary licenses for trade shows.

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 the end-user and has the order shipped directly from the supplier.

How DHJJ Can Help

South Dakota v. Wayfair resulted in almost all states adopting an economic nexus threshold. It is still important to consider other selling activities that may establish a presence in another state. Activities such as delivery with your fleet of vehicles, hiring personnel or subcontractors, housing inventory or assets, attending trade shows, or utilizing drop shipments need to be considered. Complying with states’ various sales tax laws can be difficult. For assistance, please contact DHJJ’s State and Local Tax team at 630-420-1360 or fill out the form below. To read more about other common forms of nexus, click here.

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