Understanding Nexus for Corporations

December 9, 2021

Earlier this year, we published an article outlining 5 things businesses should consider before incorporating in Delaware. Since then, we have heard quite a few questions about the importance of ‘nexus’. In this article, we’ll provide a basic overview of nexus for corporations.  


So, what is nexus for corporations?

Generally speaking, a corporation has a nexus with another state when it conducts certain actions within that state. The exact requirements vary from jurisdiction to jurisdiction, so we are speaking broadly here. If you need specific details about a certain state, we suggest you consult with local counsel. 

Depending on the state, the following may establish nexus: 

  • A physical presence, including an office or storefront. 
  • Remote employees. 
  • Sales in excess of the state threshold for establishing a tax nexus. 
  • Warehousing arrangements. 
  • Property within the state.
  • Click-through relationships that direct web traffic. 
  • Affiliate programs, where independent businesses sell through other businesses (like Amazon, Etsy, and the like). 


Triggering Events Establishing Nexus in Other States

Because the nexus requirements vary from state-to-state, we can’t comprehensively cover all the events that establish nexus in other states. We have created a list of events or milestones that may result in your business being deemed to be ‘doing business’ in another state. It is intended to be general and is not complete. Again, we suggest you consult local counsel to ascertain whether your business activities may result in a nexus being established. 

Events that may establish a nexus:

  • Hiring a remote employee. 
  • Selling products online, through a retailer, or via your own storefront. 
  • Taking on a major client, or a number of smaller clients, in one state. 
  • Developing supplier relationships with resellers. 
  • Attending a trade show or convention.  
  • Sending a consultant or advisor to provide services. 
  • Foreign registering in that state. 
  • Storing property for sale in a state.
  • Developing online referral relationships in exchange for commission.
  • Sending a travelling salesperson to a state. 


A Note About Nexus for Corporations in California

It’s not advisable to use the California nexus requirements as a baseline for other states. We have noted that nexus requirements vary from state-to-state – and California’s sales thresholds are relatively high. California’s threshold for economic nexus is $500,000. However, the threshold in many other states is $100,000 in sales or 200 transactions over a 12-month period.


If you’re uncertain about the impact of your business activities on your corporate compliance, reach out. We’re here to help! 


The materials available at this website are for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem. Use of and access to this website or any of the e-mail links contained within the site do not create an attorney-client relationship between CGL and the user or browser. The opinions expressed at or through this site are the opinions of the individual author and may not reflect the opinions of the firm or any individual attorney.

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