Despite this fundamental shift, physical presence remains a fully independent basis for taxpayers to establish sales and use tax nexus in a state due to their physical footprint. With the rise of economic nexus, many businesses have lost sight of common bases for establishing physical presence, including in-state remote workers, independent contractors, inventory, or other supply-chain relationships. Courts and state tax authorities continue to affirm physical presence as an alternative basis for establishing nexus, and historical cases remain instructive for understanding how courts evaluate the sufficiency of minimal in-state activities. Tax practitioners who advise multistate retailers must maintain a firm command of physical presence principles alongside the economic nexus framework. The lack of uniformity among states intensifies this challenge. The stakes are high: a 2024 Arizona case resulted in an $8 million assessment because third-party distributors created physical-presence nexus that the retailer overlooked. Since then, multiple state tax agencies have issued guidance continuing to stake out aggressive physical presence nexus policies.

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