SALES TAX NEXUS LAWS BY STATE

📘 Understanding Sales Tax Nexus Rules by State (2025 Overview)

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?

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. 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 OR 200 transactions 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

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.

Let Galvix handle sales tax for you

Galvix provides an end-to-end sales tax management service, including nexus monitoring, tax calculations, and return filing, giving you the confidence and time to focus on what matters - your business.

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