What it is

A nexus study is a structured analysis that determines every state in which your business has sales tax nexus — the connection that legally requires you to register, collect, and remit a state’s tax. It examines two distinct kinds of connection:

• Physical nexus — a tangible presence in the state: an office, a warehouse, remote employees, stored inventory, or even regular travel and trade-show attendance.
• Economic nexus — enough sales volume into the state to cross its threshold, commonly $100,000 in annual sales (and, in some states, a separate transaction count), regardless of any physical presence.

Performed by a tax professional, a nexus study takes a set of business inputs and turns them into a clear output: a state-by-state map of your obligations. The inputs typically include your sales by state, the locations of any inventory (including Amazon FBA and third-party-logistics warehouses), and your payroll and personnel footprint. The output tells you exactly where you have crossed into nexus, where you’re approaching a threshold, and where you have no obligation at all.

Why it matters to a multi-state seller

Every state with a sales tax writes its own nexus rules, and the thresholds and triggers differ. A multi-state seller can easily have nexus in a dozen states without realizing it — inventory sitting in an Amazon fulfillment center creates physical nexus in that state, while pure online sales can trip economic nexus in another. Guessing is dangerous in both directions: register where you don’t owe and you take on needless filing burden; miss a state where you do owe and the unpaid tax, plus penalties and interest, becomes your liability.

A nexus study replaces guessing with a documented determination. It’s the diagnostic step that drives every downstream decision — where to register, where to collect, and, for states where you discover past exposure, where to consider a voluntary disclosure agreement to clean up cheaply.

Worked example

Imagine an e-commerce brand selling nationwide through its own store and Amazon FBA. A nexus study collects the inputs and finds:

• Texas: $620,000 in sales → over the $500,000 economic threshold → economic nexus. Register and collect.
• Pennsylvania: $40,000 in sales, but FBA inventory is stored in an Amazon warehouse there → physical nexus from inventory, even though sales are well under any economic threshold. Register and collect.
• Colorado: $90,000 in sales, no inventory, no staff → under the $100,000 threshold → no nexus yet. Monitor.

Same business, three different conclusions — and the Pennsylvania result (nexus from a few units of FBA stock, not from sales) is exactly the kind of obligation a seller misses without a study.

How this connects to staying compliant

A nexus study is the foundation of a compliance program; everything else is built on its output. The typical sequence is: (1) run the study to find where you have nexus; (2) for states where you have past uncollected tax, weigh a voluntary disclosure agreement to cap the look-back and waive penalties; (3) register for permits in the states where you must collect going forward; (4) collect the right rate and file on each state’s schedule; (5) re-run or monitor as your sales and inventory footprint changes.

Because nexus is not static — new FBA warehouses, new hires, or rising sales can create it overnight — a study is best treated as a recurring checkpoint, not a one-time event.

Sources: Avalara — What is economic nexus? Guide to sales tax nexus rules: https://www.avalara.com/us/en/learn/nexus.html Sales Tax Institute — Economic Nexus State Guide: https://www.salestaxinstitute.com/resources/economic-nexus-state-guide U.S. Chamber of Commerce — Sales Tax Nexus Explained: https://www.uschamber.com/co/run/finance/sales-tax-nexus-explained