Sales tax across multiple jurisdictions: nexus, rates and QuickBooks

Sales tax used to be simple because most businesses only owed it where they had an office. That world is gone. A business selling online can owe sales tax in states it has never set foot in, across thousands of local jurisdictions with rates that change constantly. Here’s how multi-jurisdiction sales tax actually works, and how to keep QuickBooks from quietly getting it wrong.

Nexus: where you owe tax

“Nexus” is the connection that obliges you to collect a state’s sales tax. There are two kinds:

• Physical nexus — an office, employee, inventory or other physical presence in a state.
• Economic nexus — enough sales into a state to trigger an obligation even with no physical presence. Since the 2018 Wayfair decision, most states set economic-nexus thresholds based on sales volume or transaction count.

The practical upshot: a growing seller can cross economic-nexus thresholds in many states without realising it, and each one is a place you now have to register, collect and remit.

Rates: more than one number per state

A single state isn’t a single rate. State, county, city and special-district taxes stack, so the correct rate depends on the exact destination address — and most states use destination-based sourcing, meaning you charge the rate where the customer receives the goods, not where you ship from. That’s thousands of possible rate combinations, changing regularly.

Registration and filing

For every state where you have nexus, you must register for a sales-tax permit, collect at the correct rates, and file returns on that state’s schedule — each with its own frequency and due dates. Filing in one state does nothing for the others.

Marketplace facilitators

If you sell through a marketplace, the marketplace often collects and remits sales tax on your behalf under marketplace-facilitator laws — but your own direct sales are still your responsibility. Untangling which sales are covered and which aren’t is a common source of error.

Keeping QuickBooks accurate

QuickBooks automated sales tax can calculate rates by address, but it only works if it’s set up for the jurisdictions where you have nexus and fed accurate customer addresses. After a migration especially, tax settings and agencies have to be configured deliberately — historical tax that mapped to the wrong account or agency is exactly the problem covered in sales tax wrong after an import.