The Concept of "Nexus" in Sales and Use Tax

The most important concept involving sales and use taxes and electronic commerce is "nexus." Sufficient nexus must exist in order for a state to subject a vendor to sales and use tax collection obligations. Nexus may be defined as a connection between the vendor and state such that subjecting the vendor to the state's sales tax rules. These rules should not be unfair to the vendor or harmful to interstate commerce. These two requirements of fairness to the vendor and no impediment to interstate commerce stem from the U.S. Constitution, respectively, from the Due Process Clause and the Commerce Clause. Both of these requirements must be satisfied before any state will be able to impose sales and use tax collection responsibilities on a vendor.

The following questions have been addressed in this article:

Are there any effective mechanism for collection of tax on purchases from remote vendors?
Should the system be voluntary or mandatory for states and vendors?
Are there any discriminatory tax under the nexus?
Is there a requirement of Nexus for Corporate Income Tax Purposes?


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