What economic nexus changes are New Jersey and Utah implementing?

New Jersey and Utah plan to remove the 200-transaction threshold, leaving only the USD 100,000 gross revenue threshold for economic nexus.

How will removing the transaction threshold impact remote sellers?

Small sellers with low-value transactions will face fewer compliance burdens, as only those exceeding USD 100,000 in gross revenue will need to collect and remit sales tax.

Why are New Jersey and Utah eliminating the transaction threshold?

The transaction threshold did not account for the value of goods sold, placing an unfair tax burden on small sellers with many low-value transactions.

When will these economic nexus changes take effect?

While the changes are not yet final, both states are moving toward implementation, and official decisions are expected soon.

What happens if a remote seller exceeds the current transaction threshold?

Until the changes are finalized, remote sellers exceeding the 200-transaction threshold must still register for sales and use tax in both states.

Do these changes affect international sellers shipping to New Jersey and Utah?

Yes, foreign sellers shipping to these states will also benefit from the removal of the transaction threshold, reducing compliance costs.

New Jersey & Utah to Remove Economic Nexus Transaction Threshold

The Supreme Court's Wayfair ruling initiated a new trend among US states to implement the economic nexus and make out-of-state sellers liable for sales and use tax, whether selling from another US state or a foreign country.

However, since 2018, when the ruling was published, and states started defining economic nexus, several US states have already changed the economic nexus threshold, where the primary trend is to remove the transaction threshold. Utah and New Jersey are among the latest states that will make such changes.

Impact on Remote Sellers

The economic nexus rules in New Jersey and Utah are the same. Remote sellers must collect and remit sales tax when their gross revenue exceeds USD 100,000 or when they have 200 or more separate transactions during the current or prior calendar year.

With the proposed changes, both US states will repeal the 200 or more separate transactions threshold, leaving only the USD 100,000 gross revenue relevant for establishing the economic nexus.

The main reason for this is that the transaction threshold did not consider the value of the goods sold to consumers in those states. This means that someone with 200 transactions, where the value of each transaction is, for example, USD 10, is subject to the same rules and obligations as someone whose gross sales are USD 100,000.

This puts small sellers in an unfair position, as their compliance costs could be higher than their earnings. Removing the transaction threshold is logical and necessary to reduce the administrative and financial burdens for remote sellers of low-value goods.

Conclusion

While the decision to remove the transaction threshold from the economic nexus threshold is still not final, the governments of both states are moving in that direction, and it is only a matter of time before the decisions are announced and implemented.

Until the decision is final, remote sellers that exceed the transaction threshold will be required to register for sales and use tax purposes in both states.

Source: Tax Foundation, New Jersey Bill S3604, Utah Senate Bill 47