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Tax nexus

What is tax nexus?

Tax nexus is a specific legal term in the United States that refers to the threshold of business activity which must be exceeded before a company is liable to collect and pay taxes in a specific state.

In other words, a tax nexus is established when your company has a significant presence in a state, and this can be triggered by various factors. These factors can include having a physical location in the state, employing workers in the state, or exceeding a certain amount of sales in the state, among others. As a startup founder, understanding tax nexus is important because if you're deemed to have a nexus in a particular state, you'll be required to collect sales tax from customers in that state, adding to your administrative responsibilities and potential tax liabilities.

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