Intermediate Quick Answer
Why does inventory in a warehouse I don't own or control create nexus?
⚡ TL;DR
Nexus is based on your property being in a state, not on whether you own the building holding it. Your inventory — which you own — is physically present in that state, and every state's nexus rules treat owned property as physical presence. This is not a gray area: states explicitly list 'property owned by the seller in the state' as a nexus trigger.
Because nexus is about your property being in a state, not about your name being on the lease. Your inventory (which you own) is physically located in that state. That is physical presence. The fact that someone else’s building holds it is irrelevant.
Key takeaways
- Nexus law focuses on the seller’s physical presence in a state, which includes owning property (inventory) there, not owning or controlling the facility
- Amazon’s FBA network places your inventory across 20+ states; each state where your goods sit is a state where you have physical nexus
- 3PL warehouses work the same way, your inventory at a third-party fulfillment center is your property in that state
- This is not a gray area: states explicitly enumerate “property owned by the seller in the state” as a nexus-creating activity
- The logic is sound: a state can reasonably tax sellers who benefit from that state’s infrastructure (roads, courts, labor market) to store and ship their goods, regardless of who built the warehouse
- The only way to avoid warehouse nexus is to not have inventory stored in a state, negotiating with 3PLs to limit storage to states where you’re already registered is a viable strategy for some sellers
Frequently asked questions
Why does my inventory at an Amazon or 3PL warehouse create nexus if I don't own the building?
Nexus is determined by your presence in a state, not by whether you own the facility. Your inventory: the goods themselves, is your property sitting in that state. States tax the privilege of doing business within their borders, and having property (inventory) in a state is doing business there. The building belongs to Amazon or the 3PL; the goods belong to you. That's what matters.
Is there any argument that FBA inventory doesn't create nexus?
No longer. Before Wayfair, some sellers argued that inventory stored without their direct control didn't create nexus. That argument has been rejected by states and in court. Every state with a sales tax treats inventory stored by a third party on your behalf as physical presence that creates nexus. Amazon confirms this explicitly in FBA seller agreements.
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