Sales Tax Nexus for Online Businesses: When Your Store Has to Start Collecting

Sales tax nexus is the connection with a state that makes your business responsible for registering, collecting and paying that state’s sales tax. You can get it from a physical presence, like an office, employee or inventory in the state, or from economic nexus, which means your sales into the state crossed that state’s own dollar or transaction threshold, even if you’ve never set foot there.

You’ll also see this asked as “economic nexus,” “remote seller sales tax,” “do I have to collect sales tax in other states?” or “nexus thresholds by state.” It’s the same question. One quick warning before we start: this isn’t legal or tax advice. Every state writes its own rules, so treat this as the map and get a sales tax CPA or attorney to check your actual route.

Why a seller who never left home can owe tax in 20 states

For decades the rule was simple. If you didn’t have a physical presence in a state, it couldn’t make you collect its sales tax. Then on June 21, 2018, the U.S. Supreme Court decided South Dakota v. Wayfair and threw that rule out.

South Dakota’s law required out-of-state sellers to collect if they had more than $100,000 in sales or 200 separate transactions into the state in a year. The Court said that was fine. Physical presence, the majority wrote, was an outdated test. Within a couple of years nearly every state with a sales tax had copied some version of it.

Here’s why this matters to you. If you sell a physical product online, run a Shopify store, ship merch from a podcast, or sell anything taxable to customers across the country, your obligations aren’t set by where you live anymore. They’re set by where your customers live. A lot of founders find that out the expensive way, three years late, with penalties and interest stacked on top.

Physical nexus vs economic nexus

Physical nexus is the old-school kind. An office, a warehouse, an employee, a contractor selling on your behalf, or inventory sitting in a state can all create it. That includes inventory you didn’t put there yourself. If a fulfillment network spreads your stock across warehouses in several states, many of those states treat that as physical presence.

Economic nexus is the post-Wayfair kind. You cross a state’s sales threshold, and you’re in. No building, no staff, no visit required.

You only need one. And it’s state by state, so you can have nexus in Texas and none in Ohio at the same time.

Economic nexus thresholds by state (checked November 2026)

This is the part people get wrong most. There is no single national threshold. Many states use $100,000 in sales, but the biggest markets don’t, some still count transactions, and states keep changing the rules. A few examples:

Sources: California CDTFA, Texas Comptroller, New York Department of Taxation and Finance, Illinois Department of Revenue bulletin FY 2026-12, and the Sales Tax Institute economic nexus chart, all checked November 11, 2026. Thresholds change, so confirm on the state’s own revenue site before you rely on any number, including these.

Watch the fine print too. States disagree on what counts toward the threshold. Some count gross sales, some only taxable or retail sales, some include marketplace sales and some leave them out. The look-back period differs as well: calendar year, prior 12 months or prior four quarters. Two sellers with identical revenue can land on opposite sides of the line in the same state.

Five states have no statewide sales tax: Alaska, Delaware, Montana, New Hampshire and Oregon. Alaska is the odd one, because many local governments there do charge sales tax and have their own remote seller rules.

Marketplace facilitator rules: when Amazon or Etsy collects for you

Here’s some good news. Every state with a statewide sales tax now has a marketplace facilitator law. That means big platforms such as Amazon, Etsy, eBay and Walmart Marketplace generally collect and remit the sales tax on sales made through their platform.

Here’s the catch. That only covers sales on the marketplace. If you also sell through your own website, those direct sales are on you. And in a lot of states, your marketplace sales still count toward your threshold, so you can hit nexus partly on sales the platform already taxed and then owe on your website sales on top. Check each state’s treatment rather than assuming.

What sales tax nexus means for digital products and SaaS

Economic nexus applies to what a state taxes, and states don’t agree on whether digital goods are taxable. Some tax e-books, downloads, online courses or software subscriptions. Others don’t. So the same $150,000 of course sales could create a filing obligation in one state and nothing in the next. If you sell digital products, ask “is my product taxable here?” before you ask “did I cross the line?”

How to handle sales tax nexus: a founder’s checklist

1. Pull sales by state. Export your orders by ship-to state for the current and prior year, split into direct sales and marketplace sales.
2. List where you’re physically present. Offices, remote employees, contractors, trade show booths and every warehouse holding your inventory.
3. Compare against each state’s actual rule. Use the state’s own revenue site, not a two-year-old blog post.
4. Check taxability. Confirm whether what you sell is taxable in each state where you’re close.
5. Register before you collect. Most states don’t want you collecting their tax without a permit. Register, then turn on collection for that state.
6. Set a monthly check. A calendar reminder and a simple spreadsheet beat finding out at an audit. Software can track it for you once volume grows; pick whatever your accountant can work with.
7. Clean up the past quietly. If you crossed a threshold years ago, ask a professional about a voluntary disclosure agreement before the state finds you first. Penalties are often reduced when you come forward.

Who does this work matters too. A bookkeeper can keep the state-by-state sales data clean, but deciding where you have nexus and whether to file a voluntary disclosure is advisory work. If you’re not sure who should own it, our breakdown of accountant vs bookkeeper will help you split it.

The real cost of ignoring it

Sales tax is different from income tax in one nasty way. It’s money you were supposed to collect from customers and hold for the state. If you never collected it, the state doesn’t care. It can still bill you for it, out of your own margin, plus penalties and interest, going back to the day you crossed the line.

That’s why I’d rather you spend one afternoon on this now than lose a chunk of your profit later. Most founders know sales tax is “a thing.” They just keep putting it off because the store is growing and everything else feels more urgent. Growth is exactly what triggers it. Q4 is a good time to look, while you’re already lining up your year-end tax moves and your holiday sales are landing in new states.

Knowing this and doing nothing doesn’t protect you. Pull the report.

FAQ: sales tax nexus

What is economic nexus for sales tax?

Economic nexus is a sales tax obligation triggered by how much you sell into a state, not by having a physical presence there. Once your sales cross that state’s threshold, you generally have to register, collect and remit its sales tax.

Is the economic nexus threshold $100,000 in every state?

No. Many states use $100,000 in sales, but California and Texas use $500,000, New York requires more than $500,000 and more than 100 sales, and Alabama uses $250,000. Check each state’s revenue department for current rules.

Do marketplace sales count toward economic nexus?

It depends on the state. Some count sales made through Amazon, Etsy and similar marketplaces toward your threshold, and others exclude them. The marketplace usually collects tax on those sales, but your direct website sales remain your responsibility.

Do I have to collect sales tax in states where I don’t live?

You do if you have nexus there, either from a physical presence or from crossing that state’s economic nexus threshold. If you have neither, you generally don’t have to collect that state’s sales tax.

What happens if I didn’t collect sales tax when I should have?

The state can assess the uncollected tax against your business, plus penalties and interest, even though you never charged customers. Many states offer voluntary disclosure agreements that can reduce penalties if you come forward first.

Does inventory in an Amazon warehouse create sales tax nexus?

In many states, yes. Inventory stored in a state is often treated as physical presence, even if a fulfillment service chose the warehouse. Track where your inventory sits, not just where you ship from.