“Nexus” is a term used to describe what level of contacts a company must have with a state in order for that state to be able to impose taxes and/or sales/use tax collection and remittance responsibility.

“Nexus” for state income tax purposes is different from nexus for state sales/use tax collect and remit responsibility purposes (although the United States Supreme Court has never answered this question definitively).

The United States Supreme Court answered in Quill what level of contacts a company had to have with a state in order for the state to impose sales/use tax collect and remit responsibilities on an out of state company. In general, this is “physical presence.” From the opinion:

In sum, although in our cases subsequent to Bellas Hess and concerning other types of taxes we have not adopted a similar bright-line, physical presence requirement, our reasoning in those cases does not compel that we now reject the rule that Bellas Hess established in the area of sales and use taxes. To the contrary, the continuing value of a bright-line rule in this area and the doctrine and principles of stare decisis indicate that the Bellas Hess rule remains good law. For [504 U.S. 298, 318] these reasons, we disagree with the North Dakota Supreme Court’s conclusion that the time has come to renounce the bright-line test of Bellas Hess.

The level of contacts must help you establish or maintain a market for your goods or services. Thus, physical presence by itself is not a sufficient level of contacts unless it is coupled with efforts to sell your goods or services in that state. Thus, making a flight connection in Seattle on a business trip from San Francisco to Anchorage may be physical presence but that presence does nothing to help you establish or maintain a Washington market.