Economic Nexus Theory

Economic Nexus Theory refers to the concept that a business has a tax obligation in a state due to its economic presence there, even if it doesn't have a physical location. This means that if a company sells enough goods or services to residents of a state, it may be required to collect sales tax in that state. This theory has gained importance, particularly after a 2018 U.S. Supreme Court decision, which allowed states to impose taxes on remote sellers, reflecting the changing nature of commerce in a digital economy.