A Nexus is a connection. The term Nexus is used in tax law to describe a situation in which a business has a Nexus or presence in a state and is thus subject to state income taxes and to sales taxes for sales within that state.Â
Nexus describes the amount and degree of business activity that must be present before a state can tax an entity's income. If a taxpayer has Nexus in a particular state, the taxpayer must collect and remit taxes in that state.
The legal definition of Nexus varies from state to state and Nexus is determined differently for income taxes and for sales tax purposes.