sales_tax_nexus v1.0.0

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name: sales_tax_nexus description: Work out sales tax obligations by state: physical and economic nexus decision rules, threshold tracking as sales grow, registration order, trailing nexus, marketplace facilitator handling, and when to hand off to a specialist. Use when a seller asks if they need to collect sales tax in a state, when sales are growing into new states, when a remote hire or fulfillment inventory lands in a new state, or when a late nexus problem needs a voluntary disclosure check.

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Sales Tax Nexus

Purpose

Give a seller a clear answer, state by state, to one question: do we have to register, collect, and file sales tax here, and if so, since when and in what order do we fix it. The method covers physical nexus from people and inventory, economic nexus from sales volume after South Dakota v. Wayfair, marketplace sales, trailing nexus on the way out, and the voluntary disclosure route when a crossing was missed.

This skill covers United States state sales tax only. It does not cover income tax nexus, gross receipts taxes, local taxes beyond flagging that they exist, product taxability in depth, or non US regimes such as VAT and GST. Those need their own review.

Workflow

1. Build the facts before you test any threshold

Collect four lists first. Do not start with the sales spreadsheet.

• Places: every office, store, warehouse, and leased space, with open and close dates.

• People: every employee, and every contractor or agent who solicits, sells, or delivers in a state, with start dates and work state. One remote employee is enough to matter.

• Inventory: every place inventory sits, including third party fulfillment and marketplace fulfillment warehouses, with the months it sat there. Ask the marketplace for its inventory placement report. Sellers often learn about a state from that report, not from their own records.

• Sales: sales by state for the current year, the prior calendar year, and the trailing 12 months. Split each state total into direct sales and marketplace facilitated sales, and keep gross sales, taxable sales, transaction count, and refunds as separate fields where the system allows it.

If any list is missing, say so in the output and mark the review incomplete. A nexus answer built only on sales data is a partial answer.

2. Decide physical nexus first

Read references/thresholds-and-rules.md for the full trigger list.

• Mark a state as physical nexus if the business has a place, inventory, an employee, or a qualifying agent there. There is no dollar threshold and no sales test to pass. The duty starts on the first day the presence started.

• Add affiliate and click-through checks where they apply: a related entity in the state that helps maintain the market, or paid in state referral links. If either is present, add the state to the review list and check the current state rule, since several states have changed or repealed these tests.

• Record the trigger and the trigger date for each physical state. That date drives registration urgency and any late exposure estimate.

3. Test economic nexus state by state

Use the tracker in this skill for the first screen, then verify every flagged state on that state Department of Revenue site.

Run:

python3 ~/workspace/skills/sales-tax-nexus/bin/nexus_tracker.py sales_by_state.csv
python3 ~/workspace/skills/sales-tax-nexus/bin/nexus_tracker.py sales_by_state.csv --json

Input CSV header: state,gross_sales,transactions,physical_presence,marketplace_sales. Exit code 2 means at least one state is CROSSED or PHYSICAL_NEXUS.

Apply the decision rules in this order for each state:

• Rule A, no statewide tax: New Hampshire, Oregon, Montana, and Delaware have no statewide general sales tax. Alaska has none either, but local taxes apply through the Alaska Remote Seller Sales Tax Commission, so Alaska gets a local check, not a pass.

• Rule B, know the state rule before you compare: threshold amount, whether a transaction count applies and how it combines (OR, AND, or revenue only), measurement period (current or prior calendar year, rolling 12 months, or prior four quarters), and what counts (gross sales, taxable sales, or gross receipts). The common pattern is $100,000, with California and Texas at $500,000 revenue only, New York at $500,000 and more than 100 transactions, and Alabama and Mississippi at $250,000 in published summaries. Full notes in references/thresholds-and-rules.md. Verify the live rule. Thresholds change, and states keep removing transaction tests.

• Rule C, count conservatively first: run the test on gross sales including exempt and resale sales, plus marketplace sales shown separately. If the state definition later allows a narrower count, rerun and keep both runs. Never decide a close state on the narrow count alone without a cited state source.

• Rule D, apply the combine logic exactly: OR means either test crosses you, AND means you need both, revenue only means transactions do not matter in that state. The low order value trap is real: a seller can cross on 200 transactions at low revenue in an OR state. The reverse trap is also real: high transactions do not cross New York on their own because New York uses AND.

• Rule E, date the crossing: record the month the threshold was passed under that state measurement period. Registration timing runs from that date, and it differs by state. California expects registration as soon as the bar is passed. Texas allows collection to start no later than the first day of the fourth month after the crossing month. Use the state rule, not a generic 30 day guess.

Classify each state as one of: PHYSICAL_NEXUS, CROSSED, WATCH (at or above 80 percent of the threshold, or within one strong month of it), MONITOR (50 to 79 percent), CLEAR_THIS_PERIOD, NO_STATE_TAX, or LOCAL_ONLY_CHECK for Alaska.

4. Handle marketplace sales correctly

• Confirm the facilitator is registered and collecting in that state for your marketplace orders. Keep the facilitator tax report as proof. Do not collect a second time on a facilitated order.

• Keep your duty for direct sales. Your own web store, phone orders, and in person sales are never covered by a facilitator law.

• Check the state filing rule for marketplace sellers. Some states still want you registered and filing returns that report marketplace sales, even when the facilitator remitted the tax. Others excuse a marketplace only seller from registration. Record which rule applies per state.

• Keep marketplace totals in the tracker as their own column. Whether they count toward your own threshold is state specific. Texas summaries warn that marketplace sales can still count toward the total there, while other states exclude facilitated sales when the facilitator collects. Decide from the state source you checked.

5. Set the registration order

When more than one state needs action, order the work like this:

1. Late physical nexus states first. Exposure there started on a known date and grows with every sale.

1. States with a hard start deadline next. Work backward from the state deadline for the permit application, rate and sourcing setup, checkout or invoice changes, and exemption certificate collection.

1. Late economic nexus states, largest exposure first. Estimate exposure as uncollected tax on taxable direct sales since the crossing date, plus interest, before penalties. That estimate decides whether step 6 applies.

1. Current crossings with no late period. Register inside the state window and start collecting on time.

1. Watch states are not registered early by default. Put them on monthly tracking with a named owner and a written trigger. Registering in a state creates filing duties even in zero sales months, so early registration has a real cost. Register early only when a crossing is certain within the filing period or a contract or marketplace requires a permit number.

For each registration, record: permit number, effective date, filing frequency and due dates from the state welcome packet, sourcing rule for that state, and where exemption certificates will be stored. Never guess a due date. States assign frequency by volume and set their own calendars.

6. Check for late exposure before you register late

If a crossing date is in a past period and returns were not filed, run this check before filing anything:

• Has the state already contacted the business about sales tax, by notice, audit letter, or questionnaire. If yes, the voluntary disclosure route is usually closed for that tax in that state. Get specialist help before replying.

• Was tax collected from buyers and not remitted. If yes, stop and hand off. Sources treat collected but not remitted tax far more harshly, with longer or unlimited lookback in some states.

• How large is the back tax plus interest across all late states. If the total is material to the business, price a voluntary disclosure agreement before plain registration. A VDA in most states limits the lookback, commonly to 3 years for sales tax and 4 years in some states, and often waives penalties, while interest usually remains due. Colorado Department of Revenue publishes a 3 year sales tax lookback for its program. Details in references/thresholds-and-rules.md.

• For multi state exposure, note the Multistate Tax Commission voluntary disclosure program as an option a specialist can run for participating states.

Registering quietly and hoping the past stays quiet is not a plan this skill endorses. Neither is backfiling every past period at once without advice, since that can give up VDA benefits.

7. Set the ongoing tracking habit

Nexus is not a one time project. Set this cadence and name an owner:

• Monthly: export sales by state, split by channel, run the tracker, save the output with the date, and act on any new CROSSED or WATCH state that month. Monthly is mandatory once any state sits in WATCH.

• Quarterly: recheck people and inventory lists against payroll and fulfillment reports. New hires and new warehouse placements create nexus between sales reviews.

• On any trigger event, run a same week check: first remote hire in a new state, a new fulfillment center, a new marketplace, a trade show where orders will be taken, an acquisition, or a product line change that adds taxable sales in states where you sold only exempt goods before.

• Yearly: reverify thresholds and transaction tests for every registered and watch state against the live state site, and review trailing nexus before cancelling any permit.

8. Handle exits with trailing nexus

• Before cancelling a permit, check the state trailing rule in references/thresholds-and-rules.md. Many states require collection through the end of the current year or the following year, or until formal cancellation. Trailing rules change by rule amendment as well as by statute, so verify the current rule for that state before you stop collecting.

• If the state has published no clear rule, keep collecting and filing through at least the end of the current calendar year, ask the state in writing, and keep the reply.

• Cancel formally through the state process and keep the confirmation. Stopping filing without cancelling creates delinquency notices and keeps the account open in the state system.

• Keep records after exit for the audit window the state sets. Exit ends collection. It does not end audit exposure for periods you were registered or should have been.

9. Work the example when the case is mixed

Read references/worked-review.md for a full fictional review: a seller with remote employees in two states, fulfillment inventory in three more, a New York AND test that stays clear, a Florida crossing, a Washington watch state, and a Virginia transaction crossing on low revenue. Use its order of work: physical list first, tracker second, registration order third, VDA check before any late filing.

Output Contract

For every review, produce a nexus register and a short action list. The register has one row per state checked, with:

• State and status: PHYSICAL_NEXUS, CROSSED, WATCH, MONITOR, CLEAR_THIS_PERIOD, NO_STATE_TAX, or LOCAL_ONLY_CHECK.

• Basis: physical trigger, or the threshold test applied, with threshold amount, transaction test and combine logic, and measurement period.

• Numbers used: gross sales, transaction count, direct versus marketplace split, and the period the numbers cover.

• Dates: trigger or crossing date, required collection start date under that state rule, registration date or planned date.

• Source: the state Department of Revenue page or guidance checked for that state, with the check date. A row with no live source is marked UNVERIFIED and cannot support a final no nexus call on a close state.

• Next action, owner, and date.

The action list then states, in order: registrations to file now, VDA or specialist referrals to make before late registrations, watch states and their review date, permits to keep or cancel under trailing rules, and any missing facts that leave the review incomplete.

For a single state question, answer that state fully with the same fields, plus a note on which other states the same facts might affect. For a quick screen, the tracker table plus the register rows for flagged states is enough.

Operating Rules

1. Verify every threshold, period, and counting rule on the live state Department of Revenue site before a final call. This skill and its references are a screen and a method, not a substitute for the current state rule. If a fact cannot be verified, mark it UNVERIFIED and narrow the conclusion to what the verified facts support.

1. Never state that a seller has no nexus in a state from sales data alone. People, inventory, and agent facts must be checked and recorded first.

1. Never invent a threshold, date, rate, or filing deadline. Rates and taxability of a specific product vary by state and locality and are outside the threshold test. Look them up per state or mark them open.

1. Keep direct and marketplace sales separate in every count and every report. Merged totals hide the states where the counting rule turns on the channel.

1. Do not register a seller in a new state, file a back return, reply to a state notice, or submit a voluntary disclosure in their name without their explicit go ahead on that specific action. Prepare the packet, show the exposure estimate, and wait for the word.

1. Hand off to a sales tax specialist or tax attorney when any of these apply: state contact has already happened, tax was collected and not remitted, back tax plus interest is material, exposure spans many states and a VDA strategy is needed, the seller is in a sale or financing that will diligence tax history, or product taxability is the real dispute. State the trigger that fired when you refer.

1. This skill gives process guidance, not legal or tax advice for a specific business. Label estimates as estimates, keep the source trail in the register, and tell the seller plainly where the review stops and professional advice starts.

1. Worked cases in the references are fictional and illustrative. Do not present them as real sellers, real assessments, or precedent.