The place to find business sales tax information

— as well as solutions, services and jobs!

Nexus for Manufacturers Part 3: Inventory Location

author photo of Lauren Stinson

In this four-part “Nexus for Manufacturers” series, we are delving into common nexus-creating activities that often trip up manufacturers and leave them vulnerable to large liabilities. Part 1 and Part 2 of this series focused on employee activities beyond the four walls of the plants and Sales Agents. In Part 3, we will examine nexus considerations based on where your company has inventory.

Manufacturers often keep inventory at the manufacturing site or at their distribution centers. Your physical presence is clearly created at these facilities. But, perhaps not so clear is when inventory is held at facilities other than your own.

Some manufacturers, especially those located in rural areas, will store inventory in non-company owned distribution facilities convenient to trucking, rail, or air terminals. This convenience could be creating sales tax obligations for your company.

Do you ever have inventory held on consignment at your customer’s locations? This practice allows companies to quickly respond to a customer’s request for service or repair. When a product is pulled from this inventory, a sale is made and tax must be collected. Business practices that make good logistics sense could be creating sales tax traps for manufacturers.

Another growing practice is housing inventory at fulfillment centers. Amazon is a good example of this practice. Businesses sell products through the Fulfillment By Amazon (FBA) program. Consumers order products online through Amazon’s website and Amazon fulfills sales orders from their multiple warehouses all over the country.

Currently, 17 states are home to Amazon warehouses that ship and store inventory for their FBA sellers. Amazon moves inventory daily between warehouses to maintain the most efficient inventory stock. Businesses using FBA may have inventory stored in any of the FBA warehouse states, regardless of where the products were originally shipped. Consequently, FBA participants may unknowingly have nexus in multiple states where products are stored.

As you can see, nexus-creating activities are complex. Without proper management, inventory business practices that make delivery to your customers faster and more efficient can wreak havoc to your sales tax compliance.

In Part 4 of our Nexus series, we will share steps to avoid common nexus mistakes.

Have you ever received a state’s nexus questionnaire that was the result of out-of-state inventory storage? Share your best advice for avoiding nexus headaches.

About the Author: Lauren Stinson,CMI, is Principal and National Leader - Sales & Use Tax at Cherry Bekaert LLP; a national CPA and consulting firm ranked as one of the top 25 in the country. Previously, Lauren was Owner and President of Windward Tax, a sales and use tax consulting firm. She has more than 25 years experience working with manufacturers on sales and use tax issues. Lauren is pleased to share her expertise with SalesTaxSupport readers as the Manufacturing contributor in SalesTaxSupport’s Industry blog, as well as the Georgia Sales Tax contributor in the States blog.

Comments or questions may be submitted by using the on-page "Comment" feature, subject to disclaimer at bottom of page. More specific questions or requests may be sent to Lauren directly using the orange "REQUEST" link on Lauren's Firm Profile page.

Other recent “Manufacturing & Distribution” posts by Lauren Stinson, CMI:

NOTE: All blog content, comments, and participation subject to disclaimer at bottom of page.


Submit a comment or question - only your first name will appear


Access to any portion of is contingent upon your acceptance of our Terms of Use. This Web Site and content provided by STS Publishing, LLC and its third party content providers, including, but not limited to information, documents, forms, comments, advice and opinions, is for informational purposes only, and is not a substitute for professional advice, nor does the use of this Web Site constitute a professional-client relationship. The Web-Site also includes advertisements, directory listings, job postings and links to third party web sites, all of which are provided for your convenience only and in no way constitute a referral, endorsement, or warranty by of any product or service provided by such third parties. All content is provided “as is” with no guarantee regarding accuracy, suitability, or timeliness. Your reliance on any content accessed on or through the Web Site, or on any product or service provider is strictly at your own risk.