How is Nexus created in California? Well, Nexus is created in California in a variety of different ways. So the first way is through physical contacts. Physical contacts could be through employees that are in California, independent contractors that are operating on a company’s behalf within California. It could be through third parties.
So vendors or anybody who’s classified as an agent operating within the state of California is sufficient enough to create nexus within California. Then we have a group of criteria called, call them economic contacts. So if you’re doing a certain amount of business in California, if your sales revenue meets an appropriate threshold or you have other economic contacts with California, then you could be triggering nexus within California and obligating yourself to pay tax. And then the third category that I would generally use is what I call internet contacts.
So there’s a concept called click-through nexus or affiliate nexus. And so for businesses that principally operate online, you have to get into trouble that you’re not overly marketing to customers that are located in California by using any one of common internet marketing tools.
So those are ways that you trigger nexus with the state of California, and that’s how you would obligate yourself to pay tax.