What Is Economic Nexus and When Does It Apply to My Business?

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Economic nexus is a legal standard that lets a state require an out-of-state business to collect and remit its sales tax once the business's sales into that state cross a threshold, most often $100,000 a year. Every state with a statewide sales tax, plus Washington D.C., has a remote-seller threshold (Streamlined Sales Tax). If you sell on Shopify, Amazon, WooCommerce or any marketplace and ship across state lines, it's worth checking where you stand. Economic nexus is about sellers based elsewhere: a business based in a state generally has to register there however much it sells. Ohio, for example, says "Businesses with a physical location in Ohio must register to collect sales tax, no matter how much they sell" (Ohio Department of Taxation).

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Where Economic Nexus Came From

Before 2018, states could only require sales tax collection from businesses with a physical presence in their state: a warehouse, an office, an employee. Online retailers without a physical footprint in a state could not be made to collect there. The Supreme Court cited estimates that states were losing "between $8 and $33 billion every year" (South Dakota v. Wayfair, 585 U.S. 162).

The U.S. Supreme Court changed that in South Dakota v. Wayfair, Inc., decided June 21, 2018. In a 5–4 decision, the Court overruled the physical-presence rule and held that South Dakota's law, which applied to sellers delivering more than $100,000 of goods or services into the state or making 200 or more separate transactions there each year, was enough to establish the needed connection. It vacated the state court's judgment and sent the case back (Supreme Court docket 17-494). States then adopted their own thresholds over the following years. Florida's, for example, took effect July 1, 2021.

For ecommerce sellers, this was a fundamental change. Being based in Nevada doesn't protect you from owing sales tax in Texas. Shipping from a fulfillment center in Ohio doesn't eliminate your California obligations. The question that matters now is: how much did you sell to buyers in each state?

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The Standard Economic Nexus Thresholds

Most states: $100,000 in annual sales into the state. Many states once paired that with an alternative of 200 transactions, but a growing number have dropped the transaction test, so check each state's current rule.

A sample of states using the $100,000 level, checked against each state's own guidance on October 5, 2026:

For every state's current threshold, see the Streamlined Sales Tax Governing Board's remote seller state guidance, and confirm with the state's own page before you rely on it.

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States With Non-Standard Thresholds (High Error Risk)

Several states diverge from the $100,000 standard. These are the most commonly misquoted thresholds in the industry:

Texas — $500,000 (revenue only)

Texas set its safe harbor at $500,000 in total Texas revenue over the preceding twelve calendar months, and transaction count plays no role (Texas Comptroller). For a remote seller that sells on its own website and through a marketplace, Texas says to "include all sales in the safe harbor calculation, including marketplace sales" (Texas Comptroller). So a remote seller with $150,000 in Texas sales has no Texas permit obligation, while one with $600,000 that includes direct sales does. A remote seller that sells only through a marketplace certifying it collects the tax "is not required to hold a Texas tax permit" (Texas Comptroller), unless the marketplace stores its inventory in Texas and its total Texas revenue is above $500,000 (Texas Comptroller). That's for sellers based outside Texas. A seller based in Texas needs a permit regardless (Texas Comptroller).

California — $500,000 (revenue only)

California also uses a $500,000 threshold, revenue only: combined sales into California by the seller and related persons during the preceding or current calendar year (CDTFA). The statewide rate is 7.25%, and in most areas local district taxes are added on top (CDTFA). The threshold is forgiving; the compliance, once triggered, is not.

New York — $500,000 AND 100 transactions (both required)

New York uses AND logic, not OR. You must exceed both $500,000 in sales to New York buyers AND 100 separate sales, measured over the immediately preceding four sales tax quarters (NY DTF). A seller doing $800,000 in New York sales but only 80 orders does not have a New York obligation. A seller doing 300 orders but only $90,000 in total sales also does not. Both thresholds must be crossed in the same period.

Alabama and Mississippi — $250,000

Alabama and Mississippi set their thresholds at $250,000. Mississippi measures it over "any twelve month period" (MS DOR); Alabama explains its calculation on its own FAQ (Alabama DOR).

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Physical Presence Nexus Still Exists

Economic nexus didn't replace physical nexus — it added to it. You can have physical presence nexus in a state through:

• A warehouse, office, or store
• Inventory stored in the state, in many states including at a third-party fulfillment center. California says retailers that store inventory in California, including at fulfillment centers, are generally engaged in business there (CDTFA). Some states carve out marketplace-held inventory: Illinois says inventory in a marketplace's Illinois warehouse doesn't create physical presence when the marketplace remits the tax, the inventory is your only Illinois presence, and it's used only to fulfill marketplace sales (IDOR PIO-125).
• An employee, contractor, or sales representative working there
• Trade show attendance in some states (varies by state and duration)

Physical presence nexus can trigger an obligation below any economic threshold. If you use Amazon FBA or another fulfillment network, check each state's rule; our Amazon FBA nexus guide goes deeper.

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What "Crossing the Threshold" Actually Means

Each state sets both what counts and the period it measures. Definitions matter:

• Revenue threshold: what's included varies. Texas counts total Texas revenue, including nontaxable sales (Texas Comptroller), and marketplace sales for sellers who also sell direct (Texas Comptroller); Florida counts only taxable remote sales (FL DOR). Some states leave out sales a marketplace collected on (see below).
• Transaction threshold: where one still applies, check how the state counts. Michigan, for example, says "a single sales transaction consists of a single order, even if multiple items are ordered at the same time" (Michigan Treasury).

Measuring periods differ too. A common test looks at the previous or current calendar year, as in Georgia, Ohio, New Jersey, Arizona and California. Others use a rolling window: Texas looks at the preceding twelve calendar months, Illinois at the preceding 12 months, and New York at the preceding four sales tax quarters. Pennsylvania measures by calendar year.

Calendar-year sellers sometimes assume they're safe because they've only hit $80K so far "this year." But in a state that looks at the previous or current year, last year's sales can already obligate you, and in a rolling-window state, sales from late last year still count. Check each state's own page for its period.

Once you cross a threshold, the date your obligation starts depends on the state. Kansas requires a seller to "register, collect, and remit tax on the next transaction after meeting or exceeding the threshold" (KDOR). Others build in time:

• 30 days: New Jersey allows "a grace period up to 30 calendar days to register" and begin collecting (NJ Taxation)
• First of the month, 30+ days after crossing: Washington, if you didn't meet the threshold the year before (WA DOR)
• First of the month, two months after crossing: Massachusetts, when you cross $100,000 during the current year (Mass. DOR)
• Fourth month after crossing: Texas, "no later than the first day of the fourth month" after you exceed the safe harbor (cross in March, collect starting July 1) (Texas Comptroller)

Some states give no grace period. In D.C., a remote seller under $100,000 "must begin collecting sales tax on its 201st sale" (D.C. OTR). Check each state's specific effective date rules.

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What Happens When You Cross a Threshold

1. Register for a sales tax permit — File a registration application with the state's tax agency. Most states offer online registration. Timing varies by state: Texas, for example, tells permit applicants to "allow 2-3 weeks" to receive a permit (Texas Comptroller).

2. Begin collecting sales tax — Once registered, configure your store or marketplace to collect the applicable tax rate from buyers in that state.

3. File on your assigned schedule — Monthly, quarterly, or annually, depending on your sales volume and the state's assignment.

4. Remit the tax collected — Pay what you've collected to the state by the filing deadline.

Penalties and interest for missing these steps are set state by state. Our guide to what happens if you don't file sales tax covers the consequences.

For the full playbook on what to do in the days right after you cross a threshold, see you just hit a state's sales tax threshold — here's your next 30 days.

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Nexus Ends When Sales Drop Below the Threshold — Usually

If your sales into a state drop below the threshold and stay there, you may eventually stop having to collect — but it's not automatic. Many states require you to formally deregister, and some require you to stay registered for a period after dropping below the threshold. Texas, for example, requires "12 consecutive months in which total revenue" stayed under $500,000 before a remote seller can end collection (Texas Comptroller), and Illinois has retailers "file all applicable returns for one year" before re-evaluating (IDOR PIO-125).

Don't just stop filing if you think you no longer have nexus. Contact the state to deregister properly — see how to deregister from a state for the full process.

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Economic Nexus vs. Marketplace Facilitator Laws

If you sell on Amazon, Etsy, eBay, or Poshmark, you may wonder: "Does my marketplace handle this?" Partly.

Marketplace facilitator laws require marketplaces that meet a state's own threshold to collect and remit sales tax on the sales they facilitate for you. Our platform guides cover what each major marketplace says it collects.

But this doesn't always end your economic nexus exposure:

1. In some states, your marketplace sales still count toward your threshold. Texas (for sellers who also sell direct), California and New York all say so (Texas Comptroller, CDTFA, NY DTF). Other states leave them out: Massachusetts says "only the direct Massachusetts sales by a marketplace seller are counted towards the $100,000 threshold" (Mass. DOR). So $80,000 on Amazon plus $30,000 on your own store crosses a $100,000 threshold in a state that counts marketplace sales, but not in one that excludes them.

2. If you sell on multiple platforms, the combined volume across all channels matters in the states that count marketplace sales — not each platform in isolation.

3. If you have any non-marketplace channel (your own website, WooCommerce, direct Stripe payments), those sales are never covered by marketplace facilitator rules and create direct filing obligations once you cross the threshold.

Some States Exclude Marketplace Sales From Your Threshold

Illinois is one of the states that leaves marketplace sales out. Under its Leveling the Playing Field for Illinois Retail Act, a remote retailer's sales through a marketplace don't count toward its threshold "so long as the remote retailer has received certification that the marketplace facilitator" has taken on the seller's duties (IDOR Bulletin FY 2024-08). That applies to every remote retailer, not just marketplace-only sellers: direct sales into Illinois still count toward the threshold, and since January 1, 2026 the transaction count no longer applies (IDOR).

For current Illinois rules, see the Illinois Department of Revenue's Out-of-State Sales Resource Page.

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How to Determine Your Current Nexus Position

Run a sales-by-destination-state report from every channel you sell on, covering each state's measuring period:

• Shopify: Reports → Taxes → Sales by state
• Amazon Seller Central: Reports → Payments → Tax Document Library
• Other marketplaces: most have CSV export with buyer state data

Then compare each state total against that state's threshold and measuring period. Any state where you've exceeded the threshold is a state where you likely need to register, unless you sell only through marketplaces that collect for you, which some states exempt from registration. Virginia, for example, says sellers whose sales all go through a marketplace facilitator "do not need to register to collect Virginia sales tax" (Virginia Tax). Our guide to whether you need a reseller permit covers the marketplace-only question.

For what comes after registration, from collecting and filing to fixing gaps, see our multi-state sales tax compliance roadmap.

Taxero is built to take this off your plate. Upload a CSV from any platform you sell on — Whatnot, TikTok Shop, Shopify, eBay, anywhere — and Taxero calculates your current nexus exposure across all 46 U.S. sales tax jurisdictions, then monitors, registers, and files on your behalf where you owe.

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Frequently Asked Questions

Q: When did economic nexus laws start?
A: The legal authority came from the Supreme Court's South Dakota v. Wayfair decision on June 21, 2018. States adopted their own rules over the following years, some within months and others later. Florida's took effect July 1, 2021. Today every state with a statewide sales tax, plus D.C., has a remote-seller threshold. Of the 5 states with no statewide sales tax (Alaska, Montana, New Hampshire, Oregon, Delaware), Alaska still has local sales taxes that remote sellers may need to collect.

Q: Do economic nexus thresholds reset each year?
A: Not in the way most sellers assume. Many states look at the previous or current calendar year, so crossing a threshold this year can obligate you through next year as well. Kansas, for example, requires sellers over the threshold to collect "in the following year" too. Others use a rolling window, such as Texas's preceding twelve months. Once you're registered, you stay registered until you formally close the account; deregistration is a separate process.

Q: If I'm below the threshold right now, can I stop collecting tax in a state?
A: Not immediately — you need to formally request cancellation of your registration, and some states set a waiting period. Texas requires 12 consecutive months under its $500,000 threshold before a remote seller can stop, and Illinois has retailers keep filing for a year before re-evaluating.

Q: Do I owe tax on every sale to a state, or just sales above the threshold?
A: Generally, you collect on sales from the date your obligation starts — not retroactively on the sales that got you there. States differ even on the crossing sale itself: New Jersey says a remote seller "is not required to collect Sales Tax on the transaction that causes" it to meet the threshold, while D.C. starts collection on the 201st sale for a seller under $100,000 in D.C. gross receipts. Kansas says a seller in its first year over the threshold is "not required to collect and remit tax on the first $100,000 of sales." From the start date on, you collect on all your taxable sales into the state, not just the amount above the threshold.

Q: What if I just started my business and I'm nowhere near the threshold?
A: Monitor your sales by state from day one. In states that look at the current calendar year, a business that launches in October and has a strong Q4 can cross the $100,000 threshold before December 31 of its first year.

Q: Does economic nexus apply to digital products or services?
A: It can — but whether digital products and services are taxable varies widely by state, and there's no single count to rely on. This guide focuses on physical goods; digital product sellers should check each state's rules, or see our SaaS sales tax by state breakdown.

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Primary Sources

• South Dakota v. Wayfair, Inc., No. 17-494 (June 21, 2018) — Supreme Court docket
• Streamlined Sales Tax Governing Board — Remote Seller State Guidance
• Illinois Department of Revenue — Out-of-State Sales Resource Page
• California CDTFA — Wayfair FAQs
• Kansas Department of Revenue — Notice 21-17
• Massachusetts DOR — Remote Seller and Marketplace Facilitator FAQs

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The Bottom Line

Economic nexus means physical location is no longer the test. The test is: how much did you sell to buyers in each state?

For most states, the threshold is $100,000, and a shrinking number also count 200 transactions. Texas and California use $500,000. New York requires both $500,000 and 100 sales. Alabama and Mississippi use $250,000. Kansas uses $100,000.

Cross the threshold, and you owe going forward. The good news: getting compliant is straightforward if you do it proactively.

See your nexus exposure across all 46 jurisdictions → — free, no credit card required.