Intermediate Quick Answer
Does economic nexus make physical presence rules irrelevant?
⚡ TL;DR
No. Physical nexus rules are fully intact — either physical presence or crossing the economic nexus threshold independently triggers a registration obligation. Physical presence has no threshold at all: FBA inventory in a state creates nexus from day one. FBA sellers commonly find physical nexus in 10–15 states before they'd cross economic thresholds there.
No. Physical nexus rules are fully intact and in many cases create obligations before economic nexus would kick in. The two are additive, either alone triggers registration. Physical presence has no threshold at all; economic nexus has a dollar threshold.
Key takeaways
- Physical nexus and economic nexus are independent, either alone requires registration; having both just confirms the same obligation
- Physical presence (FBA inventory, warehouse, employees, sales reps) creates nexus immediately with no minimum sales threshold
- Economic nexus requires crossing a dollar or transaction threshold, which takes time to accumulate
- FBA sellers commonly discover physical nexus in 10–15 states where their Amazon inventory is stored, well before they’d cross economic nexus thresholds there
- The Wayfair decision expanded the universe of states where remote sellers owe tax, it didn’t narrow physical nexus rules
- States audit both types of nexus independently; a clean economic nexus analysis doesn’t protect against undisclosed physical nexus exposure
Frequently asked questions
Does economic nexus replace physical nexus?
No. Physical and economic nexus are independent bases for nexus, either one alone is sufficient to require registration. Physical presence (a warehouse, FBA inventory, employees) creates nexus immediately with no threshold. Economic nexus creates nexus once sales or transaction counts cross state thresholds. Both remain fully operative.
Which creates nexus first, physical or economic?
Physical nexus is immediate and has no threshold. The moment you place inventory in a state (including through Amazon FBA), store goods at a 3PL, or have an employee working there, you have nexus, regardless of your sales volume. Economic nexus only activates after crossing a threshold. For most FBA sellers, physical nexus creates obligations in states where they haven't come close to the economic nexus threshold.
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