What must exist for a seller to collect sales/use tax from a customer?

For a seller to collect sales or use tax from a customer, a physical presence in the state is essential. This requirement stems from the legal concept established by the Supreme Court case South Dakota v. Wayfair, which determined that states could impose sales tax collection obligations on sellers with a substantial nexus, meaning a physical presence, such as stores, warehouses, or employees in the state.

The physical presence criterion ensures that the seller has enough of a connection or integration within the state to be subject to its tax laws. This principle seeks to ensure fairness and compliance within the taxing jurisdiction, as local businesses are subject to these taxes and out-of-state sellers should contribute accordingly if they engage in significant sales within the state.

While registration as a vendor is important for compliance, without a physical presence, a seller typically lacks the necessary nexus required to collect sales tax legally. The volume of business transactions or partnerships with local businesses does not create that legal nexus on its own either. Hence, the presence in the state is the fundamental basis for tax collection obligation.