State and Local Tax (SALT) Nexus
SALT nexus is the sufficient connection between a taxpayer and a state or local jurisdiction that gives the jurisdiction the right to impose tax obligations on the taxpayer.
Explanation
Nexus can be established through physical presence (employees, offices, inventory, equipment) or economic activity (meeting sales or transaction thresholds). Post-Wayfair, most states have enacted economic nexus laws for sales tax (typically $100,000 in sales or 200 transactions). For income tax, the standards vary by state — some follow economic nexus, others still require physical presence under P.L. 86-272 protections (which shield certain solicitation activities from income tax). Understanding nexus is essential for compliance and planning.
Key Points
- •Physical nexus: employees, offices, property in the state
- •Economic nexus: exceeding sales/transaction thresholds (post-Wayfair)
- •P.L. 86-272 protects solicitation-only activities from state income tax
Exam Tip
P.L. 86-272 only protects against state income tax for solicitation of tangible personal property — it does not apply to sales tax, services, or intangibles.
Frequently Asked Questions
Related Topics
Multistate Taxation
Multistate taxation addresses how businesses operating in multiple states determine their tax obligations, including nexus, apportionment, and allocation of income.
Corporate Tax Planning
Corporate tax planning involves structuring business transactions and operations to minimize the overall tax burden while complying with tax laws and regulations.
Test your knowledge
Practice scenario-based questions on this topic with detailed explanations.