What are “Nowhere Sales”?

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Understanding “Nowhere Sales” and Local Sales Tax Issues

“Nowhere sales” is a term used in sales tax law to describe transactions where the location of the sale is not easily determined because it doesn’t occur in a traditional, physical location within a specific jurisdiction. These types of sales can create complexities in determining the applicable local sales tax.

What Are “Nowhere Sales”?

“Nowhere sales” often involve online or remote sales where the buyer and seller are in different jurisdictions, and the physical location of the sale isn’t clear. These can include:

  • Internet Sales: Transactions conducted entirely online where the seller ships goods to the buyer.
  • Mail-Order Sales: Orders placed via mail and fulfilled across state lines.
  • Telemarketing Sales: Sales made over the phone, with goods shipped from the seller to the buyer.

Local Sales Tax Implications

The key issue with “nowhere sales” is determining which jurisdiction’s sales tax applies. Traditionally, sales tax was collected based on the seller’s location. However, with the rise of e-commerce, this approach often doesn’t accurately capture where economic activity is occurring.

Destination-Based Sales Tax

Many states have adopted destination-based sales tax rules to address the complexities of “nowhere sales.” This means that the sales tax rate applied is based on the location where the buyer takes possession of the goods. For example, if an online retailer based in one state sells and ships a product to a buyer in another state, the sales tax rate of the buyer’s state would apply.

Economic Nexus Laws

In response to the growth of e-commerce, many states have implemented economic nexus laws. These laws require remote sellers to collect sales tax if their sales exceed a certain threshold in the state, regardless of whether they have a physical presence there. The 2018 Supreme Court decision in South Dakota v. Wayfair, Inc. paved the way for these laws by ruling that states can require online retailers to collect sales tax based on economic nexus.

Throwback Rule

The throwback rule is a method used by many states to ensure they can tax sales that would otherwise escape taxation. The rule stipulates that if sales are made to a state where the seller is not subject to tax due to lack of nexus, those sales are “thrown back” to the state of the seller’s origin and taxed there. States using the throwback rule include Alaska, Arkansas, California, Colorado, Hawaii, Idaho, Illinois, Kansas, Massachusetts, Mississippi, Montana, New Hampshire, New Mexico, North Dakota, Oklahoma, Oregon, Rhode Island, Utah, Wisconsin, and Washington D.C.

Throw-Out Rule

The throw-out rule, used in states such as Kentucky, Louisiana, and Maine, excludes sales made to jurisdictions where the seller is not subject to tax from the sales factor of the state’s apportionment formula. This means that the sales factor for these states is calculated by “throwing out” those sales, effectively increasing the tax burden on the remaining in-state sales.


  • Amazon Sales: If you buy a product on Amazon from a third-party seller located in another state, the sales tax applied will typically be based on your shipping address.
  • Etsy Purchases: When purchasing handmade items from Etsy, the sales tax will be calculated based on the destination of the shipment.

Reporting and Compliance

For businesses, complying with destination-based sales tax and economic nexus laws can be challenging. They need to keep track of the tax rates and rules in multiple jurisdictions, which can vary significantly.


“Nowhere sales” present unique challenges for local sales tax collection due to the lack of a clear, physical point of sale. With the adoption of destination-based sales tax rules, economic nexus laws, throwback, and throw-out rules, states are better able to capture tax revenue from remote sales. Businesses engaged in online and remote sales need to stay informed about these rules to ensure compliance and avoid potential penalties.

If you’re a business owner or consumer dealing with complex sales tax issues related to “nowhere sales,” consulting with a tax professional can provide valuable guidance and help you navigate the intricacies of these laws.

About This Article

This article was published and distributed by TheTax-Adviser.com, a trusted source of independent ideas. It should be viewed as general and educational information and not as financial, tax or legal advice. Individuals seeking advice tailored to their specific situation are encouraged to schedule a free consultation with a professional listed in the 1800Adviser.com directory. Both TheTax-Adviser.com and 1800Adviser.com are owned and operated by The Independent Adviser Corporation. For additional information, please refer to their Privacy Policy and Terms of Use, Legal Notices, and Disclaimer.

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