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Add Nexus Jurisdictions

This article applies to:Avalara AvaTax

Add nexus jurisdictions to tell AvaTax when and where to calculate and report taxes for your company. If you've already added nexus jurisdictions in AvaTax and need to make changes, you can edit nexus jurisdictions.

Nexus is the connection or relationship a business has with a taxing jurisdiction in which it sells products and services. This connection obligates the business to calculate, collect, report, and remit taxes. State and local authorities have varying definitions as to what constitutes nexus and who is liable for collecting and remitting sales and use taxes in their jurisdictions. 

Typically, a business must have a “substantial physical presence” in a taxing jurisdiction to have nexus there. The following items may constitute a “substantial physical presence” in a taxing jurisdiction, and therefore an obligation to calculate, collect, report, and remit tax:

  • A corporate office, storefront, or remote sales office
  • Remote employees working from home on the company payroll
  • Owned or rented warehouse space containing owned inventory
  • Owned inventory leased to a customer
  • Sales or marketing representatives making regularly scheduled visits
  • Delivery of product by a company-owned vehicle

Rules governing what constitutes nexus vary from jurisdiction to jurisdiction. Determining exactly how a rule applies to your business is critical. If you're at all uncertain about where you should be collecting and remitting taxes:

  • Contact the appropriate state or local tax agencies. Each state defines the rules for when a business is required to collect and remit sales and use tax. Therefore, each state and their tax agencies are the source for the final decision regarding if you need to collect and pay sales tax based on your business practices.
  • Contact your Customer Account Manager (CAM) for more information about Avalara Professional Services. Avalara provides a variety of professional tax services, including nexus studies, voluntary disclosure agreements, and tax registration services.

PLAY-BLUE-30px.png What is nexus?

 

Jurisdiction begin and end dates

Each jurisdiction you add includes a begin date and an end date. AvaTax compares the document date of a transactionHoverTT.png to the begin and end dates of the appropriate jurisdiction. If the document date occurs between the two dates, AvaTax processes the transaction. AvaTax calculates a 0.00% tax for all other transactions.

Change the begin date and/or end date for a jurisdiction to meet your business transaction processing needs. For example:

  • If your business is going to establish nexusHoverTT.png in a jurisdiction, you can set the begin date to that future date. When AvaTax processes a transaction for that jurisdiction, it calculates tax based on the document date. If the document date occurs before the future date you set, the tax is 0.00%. If it occurs after the date you set, it's taxed according to jurisdiction rates.
  • Conversely, if your business will no longer have nexus in a jurisdiction, you can set the end date to that future date. If the document date of a transaction occurs before the future date you set, it's taxed according to jurisdiction rates. If it occurs after the date you set, the tax is 0.00%.

AvaTax-Organization-Nexus-Begin and End Dates.png

End dates take effect one second to midnight on that day. For example, an end date of 12/31/2099 will end nexus at 11:59:59 PM on 12/31/2099.

Add nexus jurisdictions

Add nexus jurisdictions to determine where and when AvaTax calculates and reports taxes for your company. You initially add nexus jurisdictions when you configure your company tax profile. You can always come back and edit your selection.

If sales occur in jurisdictions you have not selected in AvaTax, the resulting tax calculation returns a value of zero tax.

For US-based businesses, AvaTax assumes:

  • Transactions in nexus jurisdictions are fully taxable (apart from item and customer taxability concerns)
  • Transactions in non-nexus jurisdictions are non-taxable and receive a 0.00% tax calculation

For EU-based businesses, the EU country in which the transaction takes place is only one consideration that AvaTax uses. Other factors affecting the AvaTax tax calculation are the type of good sold, whether that good is taxable or exempt, and whether it is sold to a business or a consumer.

To add nexus jurisdictions:

  1. On the Organization tab, click the Nexus Jurisdictions button Picture of the Jurisdictions button for your new company.
  2. On the Country Jurisdictions screen, select the check box next to applicable country names.
    • Selecting CANADA turns on the calculation of Canadian Goods and Services Tax (GST)HoverTT.png for products or services delivered to Canadian customers. Selecting UNITED STATES in Country Jurisdictions doesn't enable any specific tax calculation behavior.

  3. Change the Begin Date or End Date as needed. For more information, see the Jurisdiction begin dates and end dates section above.
  4. Click Save. The page refreshes, and the Select Jurisdictions button in the row for each country you selected becomes active.
  5. Click Select Jurisdictions for any country.
  6. On the State or Province Jurisdictions screen, select the check box next to applicable state or province names.
    • Selecting Canadian provinces and territories turns on the calculation of Canadian Provincial Sales Tax (PST) and/or Harmonized Sales Tax (HST) for products or services delivered to Canadian customers. If you're a GST/HST registrant, you must select the 5 participating HST provinces: New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, and Prince Edward Island. For more information, see what is GST/HST?
  7. For the United States, change the Tax Type selection if desired. For more information, see about tax types.
  8. Change the Begin Date or End Date as needed.
  9. Click Save, but don't leave this page. Depending on the states you're registered in, you may need to tell AvaTax which local jurisdictions you're registered in as well.

Add local jurisdictions

Some states have local jurisdictions with additional tax rules. Local jurisdictions include counties, cities, and special tax jurisdictions in the United States. Tell AvaTax which local jurisdictions you're registered in to get the most accurate rate possible. For more information, see about local jurisdictions.

To add local jurisdictions:

  1. On the State Jurisdictions screen, after you select and save the states to register in, click Select Jurisdictions for any state for which the button is active.

    AvaTaxCalc-Organization-TaxProfile-SelectJurisdictionsforaStateorProvince.png
  2. On the Local Jurisdictions screen, click View Jurisdictions to view the compulsory local jurisdictions, if desired.
  3. For each state in which you need to select local jurisdictions, choose how to maintain optional local jurisdictions:
    • Selective
      • You select and maintain the optional local jurisdictions. Any new optional local jurisdictions that are created and in which you are registered must be added manually. AvaTax only applies tax for transactions in these jurisdictions.
      • Find local jurisdictions for a state based on a company address using the jurisdiction finder.
    • All
      • AvaTax selects and maintains all optional local jurisdictions. Any new optional local jurisdictions are added automatically. AvaTax applies tax for transactions in all local jurisdictions.
  4. If you choose Selective, the page will reload and a list of county, city, and special tax jurisdictions displays. Select all jurisdictions in which you wish to register.
  5. Change the Begin Date or End Date as needed. For more information, see the Jurisdiction begin dates and end dates section above.
  6. Click Save.

Use the jurisdiction finder

The jurisdiction finder provides a straight-forward way to identify local jurisdictions using a company address.

To use the jurisdiction finder:

  1. On the Local Jurisdictions page, select Selective. The jurisdiction finder becomes active.
  2. Click Jurisdiction Finder.
  3. Select the Type of address for the jurisdiction finder.
  4. Enter the required information based on the Type you selected.
  5. Click Next.
  6. AvaTax selects the tax region for this address or ZIP Code.
    • If the tax region is applicable to your business, click Save & Finish to add the jurisdiction(s) and exit the jurisdiction finder or, if you would like to search for another jurisdiction, Save & Add More. (No jurisdictions are officially added until you click Save & Finish.)
    • If the tax region is not applicable:
    1. Click View and select Neighboring Tax Regions.
    2. Choose a neighboring tax region to update the list of jurisdictions, and then select the jurisdictions desired (County, City, or Special tax jurisdictions).
    3. Change the Begin Date or End Date for each jurisdiction as needed.
    4. Click Save & Finish to add the jurisdiction(s) and exit the jurisdiction finder or, if you would like to search for another jurisdiction, Save & Add More. (No jurisdictions are officially added until you click Save & Finish.)