Sales Tax Nexus: Do You Need to Collect Sales Tax in Other States?
Last updated: 2026-03-27
Summary:Sales tax nexus is the connection between your business and a state that requires you to collect and remit sales tax there. Before 2018, nexus required physical presence (an office, warehouse, or employee). After the Supreme Court's South Dakota v. Wayfairdecision, states can also impose nexus based on economic activity — typically $100,000 in sales or 200 transactions per year. Today, 46 states (plus DC and some Alaska localities) enforce economic nexus. If you sell online across state lines, you likely have nexus somewhere. Marketplace facilitators like Amazon and Etsy collect tax on your behalf in most states, but direct website sales are your responsibility.
What is sales tax nexus?
Sales tax nexus is a legal concept that determines whether a business has a sufficient connection — or "nexus" — to a state that obligates it to collect and remit sales tax on transactions in that state. Without nexus, a state cannot legally require you to act as its tax collector.
The word "nexus" comes from Latin, meaning "a binding together." In tax law, it refers to the tie between a taxpayer and a taxing jurisdiction. For decades, this tie required physical presence. That changed dramatically in 2018.
Today, there are two primary types of nexus: physical nexus and economic nexus. A business can trigger either type (or both) independently. Understanding both is critical for any business that sells across state lines — especially e-commerce sellers, SaaS companies, and businesses with remote workers.
What is the difference between physical nexus and economic nexus?
Physical Nexus
Physical nexus exists when your business has a tangible, physical presence in a state. This was the only type of nexus recognized before the 2018 Wayfair ruling. Activities that create physical nexus include:
- •Having an office, store, warehouse, or any other physical location in the state
- •Employing workers (including remote employees) who live or work in the state
- •Storing inventory in the state (including FBA warehouses used by Amazon sellers)
- •Temporarily doing business in the state — attending trade shows, making deliveries, or performing installation services
- •Owning tangible property in the state, such as equipment, vehicles, or real estate
- •Using drop-shipping arrangements where a third-party ships from a location within the state
Economic Nexus
Economic nexus exists when your business exceeds a state's sales revenue or transaction volume threshold, even without any physical presence. After the Wayfair ruling, every state with a sales tax has adopted economic nexus laws. Common triggers include:
- •Exceeding $100,000 in gross sales to customers in the state (most common threshold)
- •Completing 200 or more separate transactions with customers in the state
- •Most states use an "OR" test — exceeding either the dollar threshold or the transaction threshold triggers nexus
- •New York is a notable exception: you must meet both $500,000 in sales AND 100 transactions
| Factor | Physical Nexus | Economic Nexus |
|---|---|---|
| Trigger | Physical presence in the state | Sales volume or transaction count |
| Common threshold | Any physical presence | $100K sales or 200 transactions |
| Applies since | Always (constitutional basis) | After Wayfair (June 2018) |
| Who it affects most | Brick-and-mortar, multi-state employers | E-commerce sellers, SaaS, remote sellers |
| Can exist without the other | Yes | Yes |
What are the economic nexus thresholds by state?
Most states use a threshold of $100,000 in sales OR 200 transactions. States that differ from this standard are highlighted. Thresholds apply to the current or prior calendar year unless noted.
| State | Sales Threshold | Transaction Threshold | Effective | Notes |
|---|---|---|---|---|
| Alabama | $250,000 | None | Oct 2018 | Based on prior calendar year |
| Alaska | $100,000 | 200 | Jan 2020 | No state sales tax; applies to local jurisdictions via ARSSTC |
| Arizona | $100,000 | None | Oct 2019 | Transaction threshold removed in 2021 |
| Arkansas | $100,000 | 200 | Jul 2019 | |
| California | $500,000 | None | Apr 2019 | Highest threshold in the nation |
| Colorado | $100,000 | None | Jun 2019 | Destination sourcing for remote sellers |
| Connecticut | $100,000 | 200 | Dec 2018 | Must meet BOTH thresholds (like New York) |
| District of Columbia | $100,000 | 200 | Jan 2019 | |
| Florida | $100,000 | None | Jul 2021 | Transaction threshold removed |
| Georgia | $100,000 | 200 | Jan 2019 | |
| Hawaii | $100,000 | 200 | Jul 2018 | GET (General Excise Tax), not traditional sales tax |
| Idaho | $100,000 | None | Jun 2019 | |
| Illinois | $100,000 | None | Oct 2018 | Transaction threshold removed Jan 2026 |
| Indiana | $100,000 | 200 | Oct 2018 | |
| Iowa | $100,000 | None | Jan 2019 | Transaction threshold removed in 2022 |
| Kansas | $100,000 | None | Jul 2021 | |
| Kentucky | $100,000 | 200 | Oct 2018 | |
| Louisiana | $100,000 | 200 | Jul 2020 | Centralized collection via Louisiana Sales and Use Tax Commission |
| Maine | $100,000 | 200 | Jul 2018 | |
| Maryland | $100,000 | 200 | Oct 2018 | |
| Massachusetts | $100,000 | None | Oct 2017 | One of the first states to adopt economic nexus |
| Michigan | $100,000 | 200 | Oct 2018 | |
| Minnesota | $100,000 | 200 | Oct 2018 | |
| Mississippi | $250,000 | None | Sep 2018 | Higher threshold than most states |
| Missouri | $100,000 | None | Jan 2023 | Last state to adopt economic nexus |
| Nebraska | $100,000 | 200 | Jan 2019 | |
| Nevada | $100,000 | 200 | Oct 2018 | |
| New Jersey | $100,000 | 200 | Nov 2018 | |
| New Mexico | $100,000 | None | Jul 2019 | Gross receipts tax, not traditional sales tax |
| New York | $500,000 | 100 | Jun 2019 | Must meet both thresholds |
| North Carolina | $100,000 | 200 | Nov 2018 | |
| North Dakota | $100,000 | None | Oct 2018 | Transaction threshold removed in 2021 |
| Ohio | $100,000 | 200 | Aug 2019 | CAT (Commercial Activity Tax) has separate nexus rules |
| Oklahoma | $100,000 | None | Jul 2018 | |
| Pennsylvania | $100,000 | None | Jul 2019 | |
| Rhode Island | $100,000 | 200 | Aug 2017 | |
| South Carolina | $100,000 | None | Nov 2018 | |
| South Dakota | $100,000 | 200 | Nov 2018 | Origin of the Wayfair case |
| Tennessee | $100,000 | None | Oct 2019 | |
| Texas | $500,000 | None | Oct 2019 | One of the higher thresholds |
| Utah | $100,000 | 200 | Jan 2019 | |
| Vermont | $100,000 | 200 | Jul 2018 | |
| Virginia | $100,000 | 200 | Jul 2019 | |
| Washington | $100,000 | None | Oct 2018 | Also has B&O tax nexus rules |
| West Virginia | $100,000 | 200 | Jan 2019 | |
| Wisconsin | $100,000 | None | Oct 2018 | |
| Wyoming | $100,000 | 200 | Feb 2019 |
States with no state-level sales tax:Alaska (local taxes only via ARSSTC), Delaware, Montana, New Hampshire, Oregon. These 5 states do not have state-level economic nexus laws, although Alaska's local jurisdictions do participate in a remote seller program.
What was the South Dakota v. Wayfair decision and why does it matter?
On June 21, 2018, the U.S. Supreme Court ruled 5-4 in South Dakota v. Wayfair, Inc. (585 U.S. 162) that states can require out-of-state sellers to collect sales tax even without physical presence. This overturned the 1992 Quill Corp. v. North Dakota ruling, which had established the physical presence standard for over 25 years.
South Dakota had passed a law requiring remote sellers to collect sales tax if they exceeded $100,000 in sales or 200 transactions in the state. Wayfair, Overstock, and Newegg challenged the law, arguing it violated the Commerce Clause. The Supreme Court disagreed, finding that the physical presence rule was "unsound and incorrect" in the modern economy.
The Court noted several features of South Dakota's law that made it constitutional and set guardrails for other states:
- •A safe harbor for small sellers (under $100K or 200 transactions)
- •No retroactive application — collection obligations applied only prospectively
- •South Dakota is a member of the Streamlined Sales and Use Tax Agreement (SSUTA), simplifying compliance
- •The law did not discriminate against or place an undue burden on interstate commerce
Within two years of the ruling, every state with a sales tax adopted an economic nexus law. Missouri was the last holdout, implementing its law in January 2023. The Wayfair decision fundamentally changed e-commerce taxation and created new compliance obligations for millions of online sellers.
How do you determine if you have sales tax nexus?
Determining nexus requires analyzing your business activities state by state. Here is a step-by-step approach:
What do you do when you trigger nexus in a new state?
When you determine that you have nexus in a state, you must take these steps to become compliant:
Tip:Many states offer voluntary disclosure agreements (VDAs) if you should have been collecting but were not. A VDA lets you come into compliance with reduced or waived penalties. Contact the state's department of revenue or work with a sales tax professional to negotiate a VDA before the state contacts you.
How do marketplace facilitator laws affect your sales tax obligations?
Marketplace facilitator laws shift the sales tax collection burden from individual sellers to the marketplace platform itself. Every state with a sales tax has adopted some form of marketplace facilitator law. Here is how they work:
What is a marketplace facilitator? A marketplace facilitator is a platform that provides a forum for sellers, facilitates the sale (listing, payment processing, or order fulfillment), and collects payment from the buyer. Examples include Amazon, eBay, Etsy, Walmart Marketplace, Faire, and Airbnb.
What the marketplace handles: When a sale occurs through a marketplace facilitator, the marketplace is responsible for calculating, collecting, reporting, and remitting sales tax to the state. As a seller, you are generally relieved of the sales tax obligation for those marketplace sales.
What you still need to handle: If you also sell through your own website, at craft fairs, through invoicing, or through any non-marketplace channel, you are fully responsible for sales tax on those direct sales. You must track your own direct sales against nexus thresholds and register in states where you trigger nexus from direct sales.
Do marketplace sales count toward your nexus threshold? This varies by state. Some states include marketplace-facilitated sales when calculating your nexus threshold; others exclude them. Check each state's specific rules. Even if your nexus is triggered by combined marketplace + direct sales, you only need to collect on the direct sales portion.
Marketplace Facilitator Thresholds by State (Selected)
Most states apply the same nexus threshold to marketplace facilitators as they do to remote sellers. However, some states have specific rules:
| State | Marketplace Threshold | Key Details |
|---|---|---|
| Alabama | $250,000 | Applies to facilitator's own + third-party sales combined |
| California | $500,000 | Facilitators must collect regardless of individual seller thresholds |
| Colorado | $100,000 | Responsibility shifts to facilitator when threshold exceeded |
| New York | $500,000 + 100 tx | Must meet both thresholds; applies to cumulative marketplace sales |
| Pennsylvania | No threshold | All marketplace facilitators must collect regardless of volume |
| Texas | $500,000 | Applies to total Texas sales through the marketplace |
| Washington | $100,000 | Includes B&O tax obligations for marketplace facilitators |
Example: You sell handmade candles. You make $80,000 in sales through Etsy and $30,000 through your own Shopify store in Texas (threshold: $500,000). Etsy collects and remits tax on the $80,000. Your combined sales are $110,000, which is under the Texas threshold. You do not have economic nexus in Texas based on sales alone. But if you had a warehouse in Texas, you would have physical nexus and need to collect on your $30,000 in Shopify sales.
What are click-through nexus and affiliate nexus?
Click-Through Nexus
Click-through nexus applies when an out-of-state business pays a commission to an in-state person or business for referring customers via a website link (an affiliate link). If a New York-based blogger links to your products and earns a commission on sales, New York may consider that link sufficient to create nexus for your business.
New York pioneered click-through nexus in 2008 (often called the "Amazon tax"). The law applies when cumulative gross receipts from referrals by in-state affiliates exceed $10,000 during the preceding four quarters. About 10 states have some form of click-through nexus law, including New York, California, Illinois, and Connecticut.
Affiliate Nexus
Affiliate nexus (also called related-party nexus) applies when your business has a related entity — a subsidiary, affiliate, or commonly-controlled company — that has physical presence in a state. Even if your specific business has no physical presence, the presence of a related company can create nexus for you.
For example, if your online-only company shares common ownership with a retail chain that has stores in 20 states, an affiliate nexus law could require you to collect sales tax in all 20 states based on the retail chain's physical presence.
Practical note: Since the Wayfair decision, click-through and affiliate nexus have become less important because economic nexus casts a wider net. If you exceed the economic nexus threshold, it does not matter whether you also have click-through or affiliate nexus. However, these rules still matter for businesses that fall below the economic nexus threshold but have affiliates or referral programs in specific states.
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Frequently Asked Questions
What is the most common economic nexus threshold?
The most common threshold is $100,000 in sales OR 200 transactions in the state during the current or prior calendar year. This is modeled after South Dakota's law that was upheld in the Wayfair decision. However, several states use different thresholds — California requires $500,000 in sales, Texas requires $500,000, New York requires $500,000 AND 100 transactions, and Alabama and Mississippi use $250,000.
Do I have nexus if I sell on Amazon, Etsy, or Shopify?
If you sell through a marketplace like Amazon, Etsy, eBay, or Walmart Marketplace, the marketplace facilitator is responsible for collecting and remitting sales tax in most states. You generally do not need to collect sales tax separately on marketplace sales. However, if you also sell through your own website (e.g., a Shopify store), you are responsible for sales tax collection on those direct sales in states where you have nexus.
What happens if I have nexus but don't collect sales tax?
If you fail to collect and remit sales tax where you have nexus, you are personally liable for the uncollected tax, plus penalties and interest. States can audit you going back 3-7 years depending on the state. Penalties typically range from 10-25% of unpaid tax, plus interest of 0.5-1.5% per month. In extreme cases, states can pursue criminal charges for willful evasion.
Do SaaS companies have sales tax nexus?
It depends on the state. About half of U.S. states tax SaaS (software as a service). If your SaaS product is taxable in a state where you exceed the economic nexus threshold, you must register and collect. States like Texas, New York, Pennsylvania, and Washington tax SaaS. States like California, Colorado, and Missouri generally do not. The rules are evolving rapidly, so check each state individually.
Does nexus apply to services or only physical products?
Nexus applies to any taxable sale, including services in states that tax them. Most states primarily tax tangible personal property (physical goods), but many also tax specific services such as landscaping, cleaning, IT services, consulting, and digital products. Whether nexus matters depends on whether what you sell is taxable in that particular state.
Can I lose nexus if my sales drop below the threshold?
In most states, once you trigger nexus, you must continue collecting until you can demonstrate your sales have fallen below the threshold for a full calendar year. Some states require you to formally request to deregister. You should not simply stop collecting without confirming with the state's department of revenue.
What is the difference between origin-based and destination-based sourcing?
Origin-based sourcing means you charge sales tax based on where your business is located. Destination-based sourcing means you charge based on where the buyer is located. Most states use destination-based sourcing for remote sellers. This means if you're in Texas selling to a customer in Dallas, you charge the Dallas tax rate. About 11 states use origin-based sourcing for in-state sellers, but nearly all states use destination-based for out-of-state sellers.
Do I need to collect sales tax in states with no sales tax?
No. Five states — Alaska, Delaware, Montana, New Hampshire, and Oregon — have no state-level sales tax. However, Alaska allows local jurisdictions to impose sales tax, and the state has adopted a remote seller threshold of $100,000 or 200 transactions for those local taxes through the Alaska Remote Sellers Sales Tax Commission (ARSSTC). Delaware, Montana, New Hampshire, and Oregon have no sales tax at any level.
How do I keep track of nexus across multiple states?
Most small businesses use automated sales tax software like TaxJar, Avalara, or Vertex. These tools monitor your sales by state, alert you when you approach a nexus threshold, calculate the correct tax rate for every transaction, and auto-file returns. Costs range from $20-$500/month depending on transaction volume. For businesses selling in just 1-2 states, manual tracking with a spreadsheet is manageable.
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This is general information, not tax or legal advice. Sales tax nexus rules change frequently and vary by state. Always consult a tax professional or your state's department of revenue for guidance specific to your business. Sources: South Dakota v. Wayfair (585 U.S. 162), Streamlined Sales Tax Governing Board, TaxJar, Avalara, state department of revenue websites, SBA.gov.