Selling online? Shipping across state lines? You might owe sales tax in states you’ve never even visited. Welcome to the world of economic nexus, where your revenue, not your location, determines your tax obligations. The Wayfair decision threw a wrench into traditional sales tax rules, and now, economic nexus looms large.
Many businesses are getting tripped up by hidden complexities, leading to costly audits and penalties. We’re diving deep into the specific challenges and solutions for companies, offering actionable insights and what you need to know to protect your business.
What Is Economic Nexus?
Economic nexus is a state tax law that requires out-of-state businesses to collect and remit sales tax once they exceed a certain revenue or transaction threshold in that state. If you sell enough in a state, even without a physical presence, you owe sales tax there.
EX: For SaaS, unlike physical goods, your “product” is often delivered digitally. States have varying interpretations of what constitutes a “sale” in digital goods. Some focus on the location of the server, others on the customer’s billing address. Many states are still figuring this out, which means the rules are constantly changing.
Why Economic Nexus Exists
Before 2018, states could only tax businesses with a physical presence (store, office, or employees). That changed with South Dakota v. Wayfair, Inc., when the U.S. Supreme Court ruled states could impose economic nexus laws.
Overnight, states gained the power to force remote sellers to collect tax. They’ve been hungrily expanding their reach ever since, using sophisticated data mining software to track down non-compliant businesses. Now, 45+ states enforce economic nexus. If you’re selling online, it’s almost guaranteed you’ll hit a threshold somewhere.
Tip: Regularly track your sales by state to avoid unexpected tax obligations.
How to Know If You Have Economic Nexus
- Have you made $100,000+ in sales in any single state?
- Have you had 200+ transactions in a state (even if they were low-dollar sales)?
- Do you sell through Amazon, Shopify, or Etsy?
- Do you have contractors, affiliates, or third-party sellers in other states?
If you said yes to any, you likely have economic nexus and need to register!
This state-by-state cheat sheet provides quick-reference details on economic nexus thresholds for 2025. helping you determine where your business must register, collect, and remit sales tax.
| State | Revenue Threshold | Transaction Threshold |
| Alabama | $250,000 | N/A |
| Alaska | Varies by local jurisdiction | N/A |
| Arizona | $100,000 | N/A |
| Arkansas | $100,000 | 200+ transactions |
| California | $500,000 | N/A |
| Colorado | $100,000 | N/A |
| Connecticut | $100,000 | 200+ transactions |
| Delaware | No sales tax | N/A |
| Florida | $100,000 | N/A |
| Georgia | $100,000 | 200+ transactions |
| Hawaii | $100,000 | 200+ transactions |
| Idaho | $100,000 | N/A |
| Illinois | $100,000 | 200+ transactions |
| Indiana | $100,000 | 200+ transactions |
| Iowa | $100,000 | N/A |
| Kansas | $100,000 | N/A |
| Kentucky | $100,000 | 200+ transactions |
| Louisiana | $100,000 | 200+ transactions |
| Maine | $100,000 | 200+ transactions |
| Maryland | $100,000 | 200+ transactions |
| Massachusetts | $100,000 | N/A |
| Michigan | $100,000 | N/A |
| Minnesota | $100,000 | 200+ transactions |
| Mississippi | $250,000 | N/A |
| Missouri | $100,000 | N/A |
| Montana | No sales tax | N/A |
| Nebraska | $100,000 | 200+ transactions |
| Nevada | $100,000 | 200+ transactions |
| New Hampshire | No sales tax | N/A |
| New Jersey | $100,000 | 200+ transactions |
| New Mexico | $100,000 | N/A |
| New York | $500,000 | 100+ transactions |
| North Carolina | $100,000 | 200+ transactions |
| North Dakota | $100,000 | 200+ transactions |
| Ohio | $100,000 | 200+ transactions |
| Oklahoma | $100,000 | N/A |
| Oregon | No sales tax | N/A |
| Pennsylvania | $100,000 | N/A |
| Rhode Island | $100,000 | 200+ transactions |
| South Carolina | $100,000 | N/A |
| South Dakota | $100,000 | 200+ transactions |
| Tennessee | $100,000 | N/A |
| Texas | $500,000 | N/A |
| Utah | $100,000 | 200+ transactions |
| Vermont | $100,000 | 200+ transactions |
| Virginia | $100,000 | 200+ transactions |
| Washington | $100,000 | N/A |
| West Virginia | $100,000 | 200+ transactions |
| Wisconsin | $100,000 | 200+ transactions |
| Wyoming | $100,000 | 200+ transactions |
What To Do If You’ve Already Triggered Economic Nexus
Most businesses miss out on hidden nexus triggers without knowing them. While you’re tracking sales numbers, unseen triggers are silently creating tax obligations in unexpected states. Your Amazon inventory, temporary pop-up shops, remote employees, and dropshipping all create nexus regardless of your sales volume. These stealth triggers operate independently of thresholds, meaning you could have tax obligations in states where you’ve barely made any sales.
If you’re reading this in a cold sweat, realizing you’ve had unfulfilled nexus obligations, take a breath. Then act:
- Document your exposure – Calculate how much you’ve sold into each state and for how long
- Consider a Voluntary Disclosure Agreement (VDA) – Many states limit look-back periods and waive penalties if you come forward first
- Register and begin compliance – Even if you can’t address past liability immediately, start following the rules now.
How to Register & Stay Compliant
Step 1: Track Your State-by-State Sales; Set up dashboards in your e-commerce platform to monitor sales by state. When you hit 75% of any state’s threshold, it’s time to prepare.
We recommend monthly reviews, not quarterly. Tax thresholds can sneak up on you with frightening speed.
Step 2: Register Where Required. Once you trigger Nexus, you must register for a sales tax permit before collecting any tax. Many states offer amnesty programs if you come forward voluntarily.
Step 3: Set Up Proper Collection & Filing; Configure your sales platforms to collect the correct tax rates. Then either:
- File returns yourself (manageable for 1-3 states)
- Use automation software like Avalara (4+ states)
- Hire a sales tax professional (complex situations)
Check here for a step-by-step sales tax registration guide to stay compliant.
Economic nexus laws continue to change, making compliance more challenging for businesses. Staying informed and proactive can help you avoid penalties and unnecessary headaches.
Got questions? Schedule a consultation with our sales tax expert team to assess your compliance needs.
FAQs
1. What happens if I exceed a state’s economic nexus threshold?
You must register for a sales tax permit, start collecting tax, and file returns in that state.
Tip: Late filings can result in fines of 5–25% of unpaid taxes. Stay ahead!
2. Can states retroactively enforce economic nexus?
Most states apply nexus laws from the date you exceed the threshold. However, failure to register can lead to back taxes and penalties.
EX: A small clothing brand unknowingly hit a nexus in Florida. Three years later, Florida demanded $41,200 in unpaid sales tax and penalties. A simple $300 registration could have prevented it.
3. Do marketplace sales count toward economic nexus thresholds?
Absolutely! Even if the marketplace (like Amazon) collects tax for you, those sales still count toward your thresholds in most states.
4. How far back can states go when assessing unpaid sales tax?
Most states have a 3-4 year look-back period, but some can go back indefinitely if they determine you intentionally avoided registration.
5. If I register for sales tax in a state, does that create income tax nexus too?
Possibly. While sales and income tax nexus are technically separate, many states use sales tax registration as evidence of income tax nexus. Consult a tax professional about this important consideration.
6. Does economic nexus apply to digital products and services?
Yes, in many states. While physical products are universally taxable (with some exceptions), the taxation of digital products and services varies by state. SaaS companies, digital downloads, and online service providers often face complex nexus determination challenges.
