Understanding sales tax nexus is essential for any business selling across U.S. states. This guide explains what triggers sales tax obligations, how to navigate tax registration thresholds, and links to state-specific nexus rules to help your business stay compliant in 2025 and beyond.
Table of Contents
- What Is Sales Tax Nexus?
- What Triggers Sales Tax Obligations?
- State-by-State Sales Tax Nexus Rules
- What Happens After You Cross a Nexus Threshold?
- Why Sales Tax Compliance Matters for Remote Sellers
- Frequently Asked Questions
🔍 What Is Sales Tax Nexus?
Sales tax nexus is the level of connection between your business and a U.S. state that creates a legal obligation to collect and remit sales tax. Following the Supreme Court's 2018 South Dakota v. Wayfair decision, all 45 states with sales tax now enforce economic nexus laws, meaning you can trigger tax obligations based solely on your sales volume—even without any physical presence in that state.
Key Differences: Economic vs Physical Nexus
| Aspect | Economic Nexus | Physical Nexus |
|---|---|---|
| What triggers it? | Sales revenue or transaction volume exceeding state thresholds | Physical presence: office, warehouse, inventory, employees, or contractors |
| When did it start? | After Wayfair ruling (2018) — now enforced in all 45 sales tax states | Traditional rule — existed before Wayfair |
| Common thresholds | $100,000 in sales OR 200 transactions (varies by state) | Any physical presence, regardless of size |
| Remote sellers affected? | ✅ Yes — even if you have no presence in the state | ❌ No — only if you have presence in the state |
| Example | You sell $150K of products online to California customers from your Texas office | You hire a remote employee who works from California |
There are two primary types of nexus:
- Physical Nexus: Triggered by having a physical presence in a state — such as an office, warehouse, inventory, or employees.
- Economic Nexus: Based solely on your sales activity, typically measured by total revenue or number of transactions, even if you have no physical presence.
📌 Example: If you sell more than $100,000 worth of goods into Indiana, you're likely required to register for sales tax and begin filing returns, even if you're based elsewhere.
🚩 What Triggers Sales Tax Obligations?
Businesses may establish nexus through a variety of physical or economic activities:
- 🧍 Employees or contractors working in the state
- 📦 Inventory stored in a warehouse or fulfillment center
- 🏢 Office or retail location
- 💳 Exceeding economic nexus thresholds (e.g., $100K in sales or 200 transactions)
- 🔗 Relationships with marketplace facilitators or affiliate networks
- 🖱️ Click-through links from in-state partners
These are known as tax registration triggers, and once triggered, you must act to remain in state tax compliance.
🗺️ State-by-State Sales Tax Nexus Rules
Each U.S. state defines its own nexus thresholds and enforcement policies. Use the table below to explore economic nexus thresholds, physical nexus criteria, and detailed information for each state.
| State | Economic Nexus Threshold | Lookback Period | Marketplace Transactions Excluded | Non-taxable Transactions Excluded | Resale Transactions Excluded |
|---|---|---|---|---|---|
| Alabama | $250,000 | Previous Calendar Year | ✅ Yes | ❌ No | ✅ Yes |
| Arizona | $100,000 | Current or Previous Calendar Year | ✅ Yes | ❌ No | ❌ No |
| Arkansas | $100,000 OR 200 transactions | Current or Previous Calendar Year | ✅ Yes | ✅ Yes | ✅ Yes |
| California | $500,000 | Current or Previous Calendar Year | ❌ No | ❌ No | ❌ No |
| Colorado | $100,000 | Current or Previous Calendar Year | ✅ Yes | ❌ No | ✅ Yes |
| Connecticut | $100,000 AND 200 transactions | 12-month period ending on September 30 | ❌ No | ❌ No | ✅ Yes |
| District of Columbia | $100,000 OR 200 transactions | Current or Previous Calendar Year | ❌ No | ❌ No | ✅ Yes |
| Florida | $100,000 | Previous Calendar Year | ✅ Yes | ✅ Yes | ✅ Yes |
| Georgia | $100,000 OR 200 transactions | Current or Previous Calendar Year | ✅ Yes | ❌ No | ✅ Yes |
| Hawaii | $100,000 OR 200 transactions | Current or Previous Calendar Year | ❌ No | ❌ No | ❌ No |
| Idaho | $100,000 | Current or Previous Calendar Year | ❌ No | ❌ No | ❌ No |
| Illinois | $100,000 OR 200 transactions | Preceding 12 calendar months | ✅ Yes | ❌ No | ✅ Yes |
| Indiana | $100,000 | Current or Previous Calendar Year | ✅ Yes | ❌ No | ❌ No |
| Iowa | $100,000 | Current or Previous Calendar Year | ❌ No | ❌ No | ❌ No |
| Kansas | $100,000 | Current or Previous Calendar Year | ❌ No | ❌ No | ❌ No |
| Kentucky | $100,000 OR 200 transactions | Current or Previous Calendar Year | ❌ No | ❌ No | ❌ No |
| Louisiana | $100,000 | Current or Previous Calendar Year | ✅ Yes | ❌ No | ✅ Yes |
| Maine | $100,000 | Current or Previous Calendar Year | ✅ Yes | ❌ No | ❌ No |
| Maryland | $100,000 OR 200 transactions | Current or Previous Calendar Year | ❌ No | ❌ No | ❌ No |
| Massachusetts | $100,000 | Current or Previous Calendar Year | ✅ Yes | ❌ No | ❌ No |
| Michigan | $100,000 OR 200 transactions | Previous Calendar Year | ❌ No | ❌ No | ❌ No |
| Minnesota | $100,000 OR 200 transactions | Preceding 12 calendar months | ❌ No | ❌ No | ✅ Yes |
| Mississippi | $250,000 | Preceding 12 calendar months | ✅ Yes | ❌ No | ❌ No |
| Missouri | $100,000 | Current or Previous Calendar Year | ❌ No | ✅ Yes | ✅ Yes |
| Nebraska | $100,000 OR 200 transactions | Current or Previous Calendar Year | ❌ No | ❌ No | ✅ Yes |
| Nevada | $100,000 OR 200 transactions | Current or Previous Calendar Year | ❌ No | ❌ No | ✅ Yes |
| New Jersey | $100,000 OR 200 transactions | Current or Previous Calendar Year | ❌ No | ❌ No | ❌ No |
| New Mexico | $100,000 | Previous Calendar Year | ✅ Yes | ✅ Yes | ✅ Yes |
| New York | $500,000 AND 100 transactions | Preceding 4 Sales Tax Quarters | ❌ No | ❌ No | ❌ No |
| North Carolina | $100,000 OR 200 transactions | Current or Previous Calendar Year | ❌ No | ❌ No | ❌ No |
| North Dakota | $100,000 | Current or Previous Calendar Year | ✅ Yes | ✅ Yes | ✅ Yes |
| Ohio | $100,000 OR 200 transactions | Current or Previous Calendar Year | ❌ No | ❌ No | ✅ Yes |
| Oklahoma | $100,000 | Current or Previous Calendar Year | ✅ Yes | ✅ Yes | ✅ Yes |
| Pennsylvania | $100,000 | Previous Calendar Year | ✅ Yes | ❌ No | ❌ No |
| Puerto Rico | $100,000 OR 200 transactions | Seller's accounting year | ✅ Yes | ❌ No | ❌ No |
| Rhode Island | $100,000 OR 200 transactions | Previous Calendar Year | ❌ No | ❌ No | ❌ No |
| South Carolina | $100,000 | Current or Previous Calendar Year | ❌ No | ❌ No | ❌ No |
| South Dakota | $100,000 | Current or Previous Calendar Year | ❌ No | ❌ No | ❌ No |
| Tennessee | $100,000 | Preceding 12 calendar months | ✅ Yes | ❌ No | ✅ Yes |
| Texas | $500,000 | Preceding 12 calendar months | ❌ No | ❌ No | ❌ No |
| Utah | $100,000 OR 200 transactions | Current or Previous Calendar Year | ✅ Yes | ❌ No | ❌ No |
| Vermont | $100,000 OR 200 transactions | Preceding 4 calendar Quarters | ❌ No | ❌ No | ❌ No |
| Virginia | $100,000 OR 200 transactions | Current or Previous Calendar Year | ✅ Yes | ❌ No | ✅ Yes |
| Washington | $100,000 | Current or Previous Calendar Year | ❌ No | ❌ No | ❌ No |
| West Virginia | $100,000 OR 200 transactions | Current or Previous Calendar Year | ❌ No | ❌ No | ❌ No |
| Wisconsin | $100,000 | Current or Previous Calendar Year | ❌ No | ❌ No | ❌ No |
| Wyoming | $100,000 OR 200 transactions | Current or Previous Calendar Year | ✅ Yes | ❌ No | ❌ No |
🧾 What Happens After You Cross a Nexus Threshold?
Once a nexus threshold is crossed, you are required to:
- ✅ Register for sales tax with that state's tax department
- ✅ Begin collecting sales tax on taxable sales
- ✅ File sales tax returns regularly, even if no sales occurred during the period
Failure to comply may lead to:
- Penalties and interest
- Retroactive tax liabilities
- Increased audit risk
🌎 Why Sales Tax Compliance Matters for Remote Sellers
If you sell online and ship to customers across multiple U.S. states, you're likely a remote seller — and that means you're subject to multi-state sales tax obligations.
Even if you operate from a single location, your economic presence in other states could trigger registration requirements. Staying ahead of these rules helps prevent costly mistakes and keeps your business fully sales tax compliant.
❓ Frequently Asked Questions
What’s the difference between economic and physical nexus?
Economic nexus is triggered by exceeding certain sales or transaction thresholds in a state, even if your business has no physical presence there.
Physical nexus is created when your business has a tangible presence in a state — such as an office, warehouse, inventory, or employees.
Most U.S. states now enforce economic nexus laws following the Supreme Court’s Wayfair v. South Dakota ruling in 2018.
What are tax registration thresholds?
Tax registration thresholds are the minimum sales revenue or transaction volume at which a business is legally required to register for sales tax in a state.
These thresholds vary by state — common examples include:
- $100,000 in annual sales, or
- 200 transactions in a calendar year
Tracking these thresholds is essential to staying compliant.
What if I only sell through Amazon or another marketplace?
If you sell through a marketplace facilitator like Amazon, Etsy, or Walmart:
- Many states require the marketplace to collect and remit tax on your behalf
- However, you may still need to register in that state if you make direct sales, hold inventory there, or have a physical presence
Each state has its own rules about whether marketplace sales count toward nexus thresholds. Check your state’s nexus rules →
How can I stay compliant in multiple states?
Tracking your sales activity and nexus thresholds manually across 50 states is tedious and risky.
Galvix Nexus Tracker makes it simple:
- 🔌 Connects with QuickBooks, Stripe, Shopify, NetSuite, and more
- 📈 Automatically monitors economic and physical nexus thresholds
- 🛎 Alerts you when you're close to triggering nexus
- 🧾 Provides liability estimates and a done-for-you registration service
🎁 Not Sure Where You Have Nexus? Get a Free Analysis
If you're unsure which states you need to register in or if you've already triggered nexus without realizing it, get a free nexus study from Galvix.
We'll analyze your sales data and provide:
- State-by-state nexus report showing exactly where you have obligations
- Exact dates when nexus was triggered in each state
- Liability estimates if you're late to register
- 45-minute expert consultation to walk through your results
- Penalty waiver strategies (Voluntary Disclosure Agreements)
Completely free. No subscription required. Request your free nexus study →
Do I need to collect sales tax in every state I sell to?
No — only in states where you’ve established sales tax nexus.
For example, if you sell to 20 states but only have nexus in 8, you only need to:
- Register
- Collect
- Remit sales tax
...for those 8 states. But you must monitor all states to detect when nexus begins.
What happens if I cross a nexus threshold but don’t register?
You may be subject to:
- Penalties and interest
- Backdated tax liabilities
- Audit risk
Some states may apply registration retroactively to the date you first triggered nexus. It’s important to register promptly to avoid these consequences.
Do economic nexus thresholds reset every year?
Yes — in most states, the sales or transaction thresholds are based on the previous calendar year or the current year-to-date.
This means:
- You might lose nexus in a state if sales fall below the threshold
- But once nexus is triggered, many states still require ongoing filing unless you formally deregister
Always check the lookback period and filing rules for each state.
What counts toward the economic nexus threshold?
This depends on the state. Many include:
- Gross sales (including taxable + exempt)
- Marketplace sales (unless excluded)
- Digital products or SaaS
Some states exclude:
- Marketplace sales
- Resale/wholesale transactions
- Non-taxable items
You need to know what each state includes or excludes when calculating thresholds.
Do exempt or non-taxable sales count toward nexus?
In some states, yes — all sales count toward the threshold, regardless of whether tax was collected.
For example:
- Selling to nonprofits or resale customers may be tax-exempt
- But the state may still count those sales when determining nexus
Check the state’s specific rules or use Galvix to automatically account for these nuances.
Do remote employees or contractors create physical nexus?
Yes — in many states, hiring an employee, contractor, or salesperson located in that state can create physical nexus.
This includes:
- Full-time or part-time employees
- Remote workers
- Sales reps, marketers, and support contractors
It’s important to monitor your physical presence footprint, not just sales activity.