What it is

Physical nexus is a connection to a state based on a tangible, real-world presence there — enough of one that the state can require your business to collect and remit its sales tax. It is the original form of nexus: before 2018, a physical presence was the only thing that let a state tax a seller, under the rule the Supreme Court overturned in South Dakota v. Wayfair, Inc. Physical nexus did not go away after Wayfair; it now sits alongside economic nexus as the two main triggers.

The presences that commonly create physical nexus include:

• An office, store, or other place of business in the state.
• Employees or contractors working in the state — full-time, part-time, or remote. In most states a single worker is enough.
• Inventory stored in the state, including stock held in a third-party warehouse or a Fulfillment by Amazon (FBA) facility — even if you didn’t choose which warehouse it went to.
• Owned or leased property such as equipment or a warehouse.
• Traveling salespeople, installers, or trade-show attendance, though states draw their own lines on how much activity counts.

The unifying idea is presence: something or someone connected to your business is physically in the state.

Why it matters to a multi-state seller

For online sellers, the trap in physical nexus is inventory. When you enroll in Amazon FBA, Amazon distributes your products across fulfillment centers in multiple states, and you usually don’t control where they land. Each state where your goods are stored can treat that as a physical presence — creating nexus and a duty to collect, even in states where your direct sales are small.

Remote staff are the second trap. Hire one salesperson, developer, or support rep who works from another state, and many states consider that enough to establish physical nexus. Growth through new hires and new warehouses can quietly expand your obligations faster than your sales do.

Worked example

Say your e-commerce brand is based in Florida and uses Amazon FBA. Over the past year:

• Florida: Your office and team are here → physical nexus. You register and collect.
• Pennsylvania: Amazon stored your FBA inventory in a Pennsylvania fulfillment center → inventory in the state → physical nexus, even though you’ve never visited and your direct sales there are only $8,000.
• Georgia: You hired one fully remote customer-support rep who works from Atlanta → an employee in the state → physical nexus, regardless of sales volume.

In two of these states, nexus has nothing to do with how much you sold — it’s the warehouse and the worker that created the obligation.

State-level nuance

The core triggers — office, employees, inventory — create physical nexus almost everywhere. The differences appear at the edges, especially for temporary or occasional activity. Attending a trade show, sending an installer, or having a rep travel into a state may or may not create nexus depending on how many days the activity lasts and what it involves; some states set explicit day counts while others judge it case by case. Because these thresholds are narrow and state-specific, a touring sales team or a recurring trade-show schedule should be reviewed state by state rather than assumed safe.

How this connects to staying compliant

Physical nexus is a trigger, and once it’s pulled the obligation is the same as any other nexus: register for a permit, collect the correct combined state and local rate, and file returns on schedule. The difference from economic nexus is what you have to watch. Economic nexus is about sales numbers; physical nexus is about where your people and property are. That means your compliance map has to track operational facts — new hires, new warehouses, FBA inventory placement, travel — not just revenue.

The practical defense is to inventory your footprint: list every state where you have staff, property, or stored goods, then confirm registration in each. FBA sellers should pull their inventory-placement reports to see exactly which states hold their products.

Sources: Avalara — State-by-state physical presence nexus guide: https://www.avalara.com/us/en/learn/guides/state-by-state-physical-presence-nexus-guide.html Sales Tax Institute — What marketplace sellers need to know about sales tax nexus: https://www.salestaxinstitute.com/resources/what-marketplace-sellers-need-to-know-about-sales-tax-nexus South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018): https://www.supremecourt.gov/opinions/17pdf/17-494_j4el.pdf