Understanding Sales Tax and Income Tax Nexus for Wellness Entrepreneurs
If you run a wellness business—whether it’s yoga, personal training, or online fitness classes—navigating state taxes can feel confusing. Do you need to collect sales tax or file income tax in another state? The answer often depends on nexus, a tax term that defines your connection to a state. Let’s break it down in simple terms.
What is Nexus?
Nexus is the legal connection a business has with a state that requires it to collect taxes or file tax returns there. Nexus can be triggered by:
Physical presence (an office, studio, or employees in the state)
Economic presence (making a certain amount of sales or transactions in the state)
Both sales tax and income tax rules can apply, though they operate slightly differently.
Scenario 1: Yoga Teacher Training (In-Person + Virtual)
Situation: Students come to your studio for some training, and other portions are completed virtually.
Sales Tax:
In-person training in your state may be taxable, depending on local rules.
Virtual training to out-of-state students is usually not taxable unless the state taxes online services.
Income Tax:
States may require you to file if you earn significant revenue from residents, even if the service is delivered virtually.
Key takeaway: Physical in-person sessions in your state are most likely taxable; virtual sessions usually are not.
Scenario 2: Virtual Personal Training
Situation: You live in one state; your client lives in another, and you train them online.
Sales Tax: Most states don’t tax virtual personal training. Nexus is generally not triggered just by having clients in another state.
Income Tax: If your revenue from out-of-state clients exceeds a state’s economic threshold, you may need to file income tax there.
Key takeaway: Virtual personal training rarely triggers sales tax, but keep an eye on income tax rules if you consistently serve clients in other states.
Scenario 3: Online Live-Stream Classes
Situation: You charge for a live-streamed class, and attendees may be across the country.
Sales Tax: Some states tax digital content. You may also hit economic nexus thresholds, which require you to collect sales tax from out-of-state customers.
Income Tax: Revenue from out-of-state customers can trigger income tax filing requirements in those states.
Key takeaway: Online classes may be taxable in certain states, especially if revenue from a particular state is substantial.
Bottom Line
State taxation—both sales tax and income tax—can be very complex. No two states are the same, and each has its own rules for taxing services as well as how it interacts with businesses in other states. If you’re working with customers from other states in any capacity, it’s crucial to have a knowledgeable CPA who can guide you through the rules, help you stay compliant, and ensure you’re not leaving money on the table or facing unexpected tax issues.
Takeaways for Wellness Entrepreneurs:
Physical presence triggers nexus automatically.
Economic thresholds (sales or transactions) may trigger nexus even if you have no physical presence.
Check state rules carefully for digital services—they vary widely.
Compliance Tip: Keep detailed records of where your clients are located and the type of services you provide. This will help you stay compliant and avoid surprises during tax season.
