Does Storing Inventory in a State Create Nexus?

Short Answer: Yes. In the vast majority of U.S. states, storing inventory, whether in your own warehouse, a third-party logistics (3PL) facility, or an Amazon FBA fulfillment center, creates a physical nexus and triggers a sales tax collection obligation.

What Is Physical Nexus?

Physical nexus is the legal connection between your business and a state based on a tangible presence. Unlike economic nexus (which is triggered by sales volume or transaction count), physical nexus has no dollar threshold. The moment you establish a qualifying physical presence, your obligation begins from the very first dollar of taxable sales.

Common activities that establish physical nexus include:

• Maintaining an office, store, or warehouse

• Storing inventory in the state (including through third-party fulfillment centers)

• Having employees or remote workers in the state

• Attending trade shows and taking orders

The Golden Rule: Inventory = Physical Nexus

In the vast majority of U.S. states, storing tangible personal property (TPP) in a warehouse creates physical nexus regardless of who owns the building.

The key factor is ownership of the goods, not control of the facility. If your products are sitting on a shelf in a state, that state considers you to have a physical presence.

Common Inventory Storage Scenarios

1. Your Own Warehouse or Storage Unit

If you lease or own a warehouse, storage facility, or even a simple storage unit in a state, you have physical nexus. This is true even if:

• The storage unit contains inactive or unsold inventory

• You have no employees in the state

• You are making zero sales in the state

The law does not distinguish between "active" and "inactive" inventory. As long as you own property within the state borders, nexus exists.

2. Third-Party Logistics (3PL) Warehouses

Storing inventory with a 3PL provider creates physical nexus in that state. States treat inventory held by third parties the same as company-owned inventory. For example, Florida law explicitly states that storing inventory with a 3PL creates physical nexus and requires registration.

3. Amazon FBA (Fulfillment by Amazon)

This is where most confusion arises. Here's what you need to know:

• If you sell exclusively on Amazon: Some states may not require a separate sales tax permit because Amazon, as a Marketplace Facilitator, already collects and remits tax on your behalf. However, the inventory still technically creates physical nexus.

• If you use Multi-Channel Fulfillment (MCF): If you're fulfilling orders from your own website (Shopify, BigCommerce, etc.) using the same FBA inventory, you must register to collect and remit tax on those non-Amazon sales. Amazon only covers sales made through its own marketplace.

Key takeaway: FBA sellers using a hybrid model (Amazon + direct-to-consumer) need to be registered in every state where Amazon stores their inventory.

What Does NOT Create Physical Nexus?

Not every physical activity in a state rises to the level of nexus:

Shipping goods through a state via common carrier does not qualify as physical nexus in any of the 50 U.S. states.

Recommended Actions

• Identify your inventory locations: Use Amazon's "Inventory Event Detail" reports or your 3PL provider's dashboard to confirm which states house your products.

• Register proactively: If your inventory is stored in a state, register before making sales to avoid back-tax liability.

• Monitor changes: Amazon frequently moves FBA inventory between warehouses without notice. Kintsugi can help track which states are affected.

• Remove inventory to break nexus: The only way to officially "break" physical nexus is to remove all company-owned property from the state. Be aware of trailing nexus periods.

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