Sales Tax Nexus: When You Have to Collect Sales Tax

Two kinds of nexus

1. Physical nexus — office, warehouse, employee, contractor, inventory (including FBA stock) in a state
2. Economic nexus — exceeding a state's sales-dollar or transaction threshold

Wayfair changed the rules

The 2018 Supreme Court decision South Dakota v Wayfair killed the physical-presence requirement. Every state can now require remote sellers above a threshold to register, collect, and remit sales tax.

Typical economic nexus thresholds

• Most states: $100,000 in sales OR 200 transactions per year
• California, New York, Texas: $500,000 in sales
• A handful of states have dropped the transaction count, sticking with dollar thresholds only

Marketplace facilitator laws

If you sell exclusively through Amazon, Etsy, eBay, or Walmart, those platforms collect and remit sales tax on your behalf in nearly all states. You may still need to register for income tax / business license purposes — but sales tax filings are usually unnecessary for marketplace-only sellers.

Direct sellers — what to do

1. Track sales by state monthly
2. Register in every state where you cross the threshold (some have a grace period, most don't)
3. Charge correct destination-based rates (most states are destination-sourced)
4. File returns at the state's required frequency (monthly/quarterly/annual)
5. Use software (TaxJar, Avalara, Stripe Tax) — DIY is unrealistic past a few states

Product taxability varies wildly

Clothing is exempt in MN, NJ, PA. Groceries taxed at reduced rate in some states, fully exempt in others. SaaS is taxed in NY, TX, WA but not CA. Always check by state and category.

International sellers selling INTO the US

Same Wayfair rules apply. A UK Shopify seller crossing CA's $500K threshold owes CA sales tax. No US presence required to trigger nexus.