Why Is Determining Sales Tax Nexus (USA) So Complicated?

Someone on Reddit asked why determining sales tax nexus in the United States is so complicated: if a company is in state X and selling to an entity in state Y, you'd think figuring out whether the company must collect and remit sales tax would be simple, but every state is different and state websites have been less than helpful. They asked: Is there help or advice on determining this that's less expensive than a full-blown nexus study? Or is that really the only way forward? Nexus is complicated because there is no single national sales tax; each state (and many localities) sets its own rules, physical presence and economic nexus (e.g., sales or transaction thresholds) vary by state, and state guidance is often hard to find or use. You don't have to do only a full nexus study. Lower-cost options include sales tax software with nexus tools, state DOR pages, SST/MTC multistate resources, a targeted SALT consult, and industry resources; a full study may still be worth it for complex or high-risk situations.

Bottom line: Nexus is complicated because the U.S. has no single national sales tax and each state sets its own rules for who must collect and when; the two main triggers (physical presence and economic nexus, e.g., $100k sales or 200 transactions, with thresholds varying by state) require checking each state you sell into, and state websites are often clunky. You do not need only a full nexus study: cheaper options include sales tax/nexus software (e.g., Avalara, TaxJar), state DOR nexus pages, Streamlined Sales Tax and MTC resources, a short SALT professional engagement, and industry resources. For complex footprints or high-risk situations, a full nexus study can still be the right investment.

Question from Reddit

Why does determining nexus (USA) have to be so damn complicated?

If a company is located in X state, and selling to an entity in Y state, you'd think that figuring out whether the company is required to collect and remit sales tax would be simple. Every state is different, and all of the state websites I've visited so far have been less than helpful. Is anyone aware of some form of help or advice on determining this that's less expensive than a full-blown nexus study? Or is that really the only way forward?

Source: Reddit

Analysis

The user is frustrated that determining nexus (whether a business must collect and remit sales tax in a state) is complicated even when the fact pattern seems simple (company in state X, customer in state Y). They've found that every state is different and state websites are not very helpful. They want to know whether there are lower-cost options than a full nexus study (or if a full study is really the only path). Nexus complexity comes from state-by-state rules (physical presence, economic nexus thresholds, activities), no single federal rule, and clunky or hard-to-find state guidance. There are cheaper options: sales tax software with nexus tools, state and multistate resources, targeted advice from a SALT (state and local tax) pro, and industry resources, though for complex or high-risk situations a full nexus study may still be the right call.

Answer

Why nexus is so complicated

States run their own show. The U.S. has no single national sales tax. The differing nexus laws across states stem from the U.S. federal structure: states have the authority to impose their own tax regulations, which results in a patchwork of laws that can be confusing for businesses operating across state lines. Each state (and many localities) sets its own rules for who must collect sales tax and when. So "company in X, customer in Y" is only the start; you then have to ask: Does state Y (and sometimes X) say you have nexus there?
Two main triggers: physical presence and economic nexus. Many states use physical presence (office, warehouse, employees, inventory, etc. in the state) and economic nexus (e.g., sales or transaction count into the state above a threshold, often $100,000 in sales or 200 transactions per year, but thresholds and rules vary by state). So you have to check each state you sell into: Do we have physical presence? Did we cross the economic nexus threshold?
State websites are often clunky. State Departments of Revenue (or equivalent) publish nexus and remote seller guidance, but it's state-by-state, not always easy to find or written in plain English. So even when the law is there, figuring it out yourself is time-consuming and error-prone.

Lower-cost options than a full nexus study

Full nexus study = a detailed, state-by-state review of your activities, sales, and transactions to determine where you have nexus and what you must do. It's thorough but expensive. You don't always need one to get enough clarity to comply. Cheaper options include:

Sales tax / nexus software and tools. Many sales tax platforms (e.g., Avalara, TaxJar, Sovos) offer nexus tools: you input where you have physical presence and sales/transaction data by state, and they help you see where you likely have nexus (and may alert you when you're approaching thresholds). Pricing is usually subscription-based (per month or per year), not a one-off "nexus study" fee. So you can get ongoing nexus support without paying for a full study up front.
State DOR pages (even if clunky). Each state's tax authority has nexus and remote seller guidance, often under "Sales and Use Tax," "Nexus," or "Remote Sellers." Bookmark the nexus page for each state you sell into and check the thresholds and rules. It's free but tedious; use it to triangulate with software or a pro.
Streamlined Sales Tax (SST) and multistate resources. The Streamlined Sales Tax Project and some multistate or industry resources (e.g., MTC, Multistate Tax Commission) publish summaries or charts of economic nexus thresholds and rules by state. They don't replace state law but can give you a faster overview than clicking through every state site.
Targeted consult with a SALT pro. Instead of a full nexus study, you can hire a tax professional who does state and local tax (SALT) for a short engagement: e.g., "Here's where we have presence and our sales by state; where do we likely have nexus and what do we need to do?" That's cheaper than a full study and can be enough if your footprint and sales are straightforward.
Industry or trade associations. Some trade groups and industry associations offer sales tax or nexus guidance, checklists, or webinars. Quality varies, but they can be a low-cost starting point.

When a full nexus study may still be worth it

If your business has lots of physical presence (e.g., employees, warehouses, contractors) in many states, or high sales in many states, or you're in a high-risk industry (e.g., audits), a full nexus study can document your positions and reduce audit risk. So it's not the "only" way forward, but for complex or high-stakes situations it can still be the right investment.

Summary

Nexus is complicated because each state has its own rules and state sites are often hard to use. You're not wrong to be frustrated.
Cheaper than a full study: Sales tax software with nexus tools, state and multistate (SST/MTC) resources, a targeted SALT consult, and industry resources. Start with software or a short pro engagement; upgrade to a full study if your footprint or risk justifies it.
Margen can help you model business income and tax; for sales tax nexus and compliance, use nexus tools or a SALT professional.
Keep records of sales by state (and transaction counts where relevant) so you can assess nexus and respond to state inquiries.

Applicable Sections

State / Multistate

State nexus rules: Each state's Department of Revenue (or equivalent) publishes nexus and remote seller rules; physical presence and economic nexus (e.g., sales or transaction thresholds) vary by state.
South Dakota v. Wayfair, 576 U.S. 977 (2018): U.S. Supreme Court allowed economic nexus; most states now have economic nexus thresholds (e.g., $100,000 in sales or 200 transactions per year; state-specific).
Streamlined Sales Tax (SST) and Multistate Tax Commission (MTC): Multistate resources that summarize nexus and remote seller rules; useful for overview, not a substitute for state law.

Practical Notes

Why it's messy: State-by-state rules, physical vs. economic nexus, clunky state sites; no single "simple" answer for "X sells to Y."
Lower-cost options: Sales tax software (nexus tools), state DOR pages, SST/MTC summaries, targeted SALT consult, industry resources.
Full nexus study = not the only option; use it when footprint or risk justifies the cost.
Keep sales by state (and transaction counts) for nexus and audits.
Margen for income tax; nexus tools or SALT pro for sales tax compliance.

Limitations

This answer does not cover every state's nexus rules or local taxes. State law and thresholds change. For your business and each state you sell into, consult a tax professional or sales tax specialist. You can use Margen for income tax; for nexus and sales tax, use software or a SALT pro.

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Why Is Determining Nexus (USA) So Complicated? Cheaper Options Than a Full Nexus Study (Reddit Q&A)