Sales tax nexus. Where you owe, when you owe, what triggers it.
Before 2018, sales tax obligations required physical presence in a state. The Supreme Court's Wayfair decision (2018) changed everything: economic activity alone (sales volume into a state) now creates nexus. Most US states adopted economic nexus laws within 2 years. This guide explains the rules, thresholds by state, and the multi-state filing reality for modern ecommerce, SaaS, and dropshipping businesses.
Start here.
Office, employees, inventory (FBA), property, salespeople, contractors in a state. Always creates nexus.
Revenue or transaction volume into a state. Threshold typically $100k revenue OR 200 transactions, but varies.
Amazon, Etsy, eBay, Walmart Marketplace, and others collect and remit sales tax on behalf of sellers. Sellers may still need to register.
Origin states tax based on seller's location. Destination states (most) tax based on customer's location.
Whether software/SaaS is taxable varies dramatically by state. About 20 states tax SaaS; the rest do not.
The full explanation.
Physical nexus triggers
Office, warehouse, retail location, employees working in a state, inventory stored there (including third-party warehouses like Amazon FBA), independent contractors performing work, attending trade shows for extended periods, owning property. Any of these creates physical nexus.
Economic nexus (post-Wayfair)
South Dakota v. Wayfair (2018) upheld South Dakota's law requiring sales tax collection from sellers with $100k revenue or 200 transactions in the state. By 2020, nearly every state adopted similar laws. Common threshold: $100k revenue. Many states dropped the 200-transaction prong as redundant.
Threshold examples
California: $500k. Texas: $500k. New York: $500k AND 100 transactions. Florida: $100k. Washington: $100k. Most states: $100k OR 200 transactions.
Marketplace facilitator laws
Amazon, eBay, Etsy, Walmart Marketplace, Shopify (in some cases), Mercari, and other marketplaces are required by state law to collect and remit sales tax on behalf of third-party sellers. Sellers may still need to register but the marketplace handles collection/remittance for marketplace sales. Direct-from-website sales bypass marketplace facilitator coverage.
Registration process
Once nexus is established in a state, register with the state Department of Revenue for a sales tax permit (free in most states; $20-$100 in a few). Begin collecting sales tax on taxable sales. File returns monthly, quarterly, or annually depending on volume. Some states allow voluntary disclosure for prior-period sales tax obligations with reduced penalties.
Software platforms
TaxJar, Avalara, Anrok, Vertex automate nexus monitoring, registration, calculation, and filing across multiple states. Pricing typically $20-$200/month plus per-return fees. Our books integration includes basic sales tax tracking; complex multi-state operations benefit from dedicated platforms.
Use tax (companion)
When sales tax was not collected (e.g., online out-of-state purchase to a customer in a state where seller had no nexus), customer technically owes "use tax" to their own state. Rarely enforced for individuals; aggressively enforced for businesses.
Non-taxable services
Most professional services (legal, accounting, consulting, healthcare) are not subject to sales tax in most states. Some states tax some services (Hawaii general excise tax covers most services; New Mexico gross receipts tax similar).
Worked example: Shopify store with $300k revenue, 5 states
| Home state (Texas) | Physical nexus. Register, collect, remit Texas sales tax. |
| California: $120k revenue, 800 transactions | Economic nexus crossed (CA threshold $500k). NOT crossed. No registration needed yet. |
| Florida: $110k revenue, 600 transactions | Economic nexus crossed ($100k threshold). Register, collect, remit Florida. |
| New York: $30k revenue, 50 transactions | Below thresholds. No registration needed. |
| Washington: $90k revenue, 700 transactions | Threshold $100k. Not crossed. Watch as you scale. |
| Result | Register in Texas + Florida initially. Monitor California, Washington for crossing. |
Common questions.
What is sales tax nexus?
What is economic nexus?
Does selling online create nexus?
Does inventory create nexus?
How do I know where I have nexus?
What happens if I have nexus but do not register?
Do marketplaces handle nexus for me?
How often do the thresholds change?
Can File.Business handle my sales tax nexus?
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