Sales Tax Nexus: Types, Rules, and Thresholds

What Is Sales Tax Nexus?

Sales tax nexus is the link between your business and a state that requires you to register, collect, and remit sales tax there. No nexus means no duty to collect. Nexus exists means you owe collection on taxable sales into that state.

Nexus is created three ways. Physical presence creates it. Sales volume into a state creates it. Certain in-state relationships create it.

The rule rests on the U.S. Constitution. The Commerce Clause (Article I, Section 8) lets Congress regulate interstate commerce and limits how states tax out-of-state sellers. The Due Process Clause of the Fourteenth Amendment requires a minimum connection between the state and the person taxed. A state cannot tax activity it has no sufficient connection to. The Supreme Court set the modern standard in Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977), which requires a “substantial nexus” with the taxing state. The five types below are the practical forms that substantial nexus takes.

What Did South Dakota v. Wayfair Change?

On June 21, 2018, the Supreme Court ruled 5 to 4 that physical presence is not required for nexus. Economic activity alone is enough. The decision overruled Quill Corp. v. North Dakota, 504 U.S. 298 (1992), and National Bellas Hess, Inc. v. Illinois, 386 U.S. 753 (1967).

Under Quill, a seller with no physical presence in a state could not be forced to collect. That is why catalog and early e-commerce sellers collected almost nowhere. South Dakota v. Wayfair ended that rule. The Court called the physical-presence test “unsound and incorrect.”

The South Dakota law the Court upheld set a threshold of more than $100,000 in sales OR 200 or more separate transactions delivered into the state in the current or previous calendar year. The Court flagged three features that limited the burden on small sellers: a dollar-and-transaction threshold, no retroactive enforcement, and South Dakota’s membership in the Streamlined Sales and Use Tax Agreement (SSUTA), a multistate simplification pact with 23 full member states per the Streamlined Sales Tax Governing Board. After the ruling, every state with a sales tax adopted economic nexus.

A common misconception survives from the Quill era: that nexus requires physical presence. It has been wrong since June 21, 2018.

Five states levy no statewide sales tax. They are the NOMAD states: New Hampshire, Oregon, Montana, Alaska, and Delaware, per the Tax Foundation’s state sales tax data. Alaska is the exception that catches sellers. It has no state tax, but local jurisdictions do, and the Alaska Remote Seller Sales Tax Commission (ARSSTC) enforces a $100,000 statewide gross-sales threshold for them.

What Are the Types of Sales Tax Nexus?

Five types matter in practice: physical, economic, marketplace facilitator, click-through, and affiliate. The table below shows what triggers each and who it catches.

What Creates Physical Presence Nexus?

Any tangible presence in a state creates physical nexus. That includes an office, a store, employees, independent contractors, inventory, or leased equipment. Some states also count trade-show days above a set number.

One remote employee can create nexus. Post-COVID, a single worker living in a state is in-state presence for most states. A foreign qualification filing alone does not create physical nexus; the trigger is people, property, or inventory in the state.

Inventory is the trap for Fulfillment by Amazon (FBA) sellers. When Amazon moves your stock into its warehouses, that inventory creates physical nexus in those states. Storing goods at a third-party logistics (3PL) provider or co-packer does the same. Many third-party sellers hold physical nexus in a dozen or more states without knowing it.

What Is Economic Nexus?

Economic nexus comes from sales revenue or transaction count into a state, with no presence required. South Dakota v. Wayfair set the template at $100,000 in sales OR 200 transactions, and states diverged from there.

The clear trend is dropping the transaction test, because 200 transactions catches tiny sellers. South Dakota itself removed its 200-transaction prong through SB 30, effective July 1, 2023, leaving a $100,000 revenue-only threshold. Some states set higher dollar bars: California, Texas, and New York all use $500,000.

What counts toward the threshold varies by state, covering gross, retail, or taxable sales, and whether marketplace sales count. Measurement periods also differ. California measures the preceding or current calendar year, with a $500,000 sales-only threshold, per the California Department of Tax and Fee Administration (CDTFA). New York measures the immediately preceding four sales tax quarters, per the New York State Department of Taxation and Finance. Texas measures the preceding twelve calendar months, per the Texas Comptroller.

What Is Marketplace Facilitator Nexus?

Marketplace facilitator nexus has two faces. State statutes codify it as its own nexus category. The same laws also shift collection from the seller to the platform, so Amazon, Etsy, Walmart, or eBay collects on facilitated sales.

Every state with a sales tax, plus the District of Columbia (DC), now has a marketplace facilitator law. Missouri was the last to adopt one, effective January 1, 2023.

The platform collecting does not always erase your duties. In California, the facilitator became the seller of record for facilitated sales on October 1, 2019, and sellers whose sales are entirely facilitated need not register, per CDTFA. Other states still require you to register and file. States also differ on whether your marketplace sales count toward the economic threshold for your direct sales. Check each state before assuming the platform covers you.

What Is Click-Through Nexus?

Click-through nexus is created when an in-state person refers customers to you for a commission, usually through links on their site. New York introduced it in 2008 with the original “Amazon law.”

Economic nexus has made click-through rules mostly redundant since 2018. They remain on the books in several states, so they still apply. Ordinary advertising with no commission does not trigger them.

What Is Affiliate Nexus?

Affiliate nexus is created when a related in-state entity supports your sales, through common ownership, shared branding, or in-state activity performed on your behalf. A related company handling sales for you in a state can create nexus for you there. Affiliate nexus is about related business relationships; click-through nexus is about paid referrals.

Economic Nexus vs. Physical Nexus: What’s the Difference?

Physical nexus comes from where your business is. Economic nexus comes from where your customers are. The table sets them side by side.

Most multichannel sellers have both. Either one alone creates the full collection obligation, and you evaluate each state on its own.

What Are the Sales Tax Nexus Thresholds by State?

Most states use $100,000 in annual sales. The outliers are what trip sellers up. The representative table below shows the range, with the details competitors gloss over.

Thresholds last verified July 2026 against each state’s Department of Revenue (DOR).

Watch the traps. New York is conjunctive: you owe only after crossing $500,000 AND more than 100 sales, not either one. California, Texas, and New York sit at $500,000, with no transaction test in California or Texas. Florida counts taxable sales only. For the full 50-state list, see the Commenda US nexus exposure guide, and the per-state detail in the California sales tax guide, Texas sales tax guide, and New York sales tax guide.

Origin-Based vs. Destination-Based Sales Tax: Which Rate Do You Charge?

This rule decides which rate you charge, not whether you have nexus. Origin-based means you charge the rate at the seller’s location. Destination-based means you charge the rate at the buyer’s ship-to address, and that is the majority rule.

Under destination sourcing, rates vary within a single state. A state rate, a county rate, a city rate, and a special-district rate can stack on the same order, so combined rates differ by ZIP code. California, for example, requires remote retailers to collect district use tax once sales into a single district exceed $500,000, per CDTFA.

Sourcing applies to remote sellers too. Most origin-based states are origin-based only for in-state sellers on in-state sales. A remote seller shipping into those states generally still charges the destination rate. So a remote seller cannot skip this section.

The commonly cited origin-based states include Arizona, Illinois, Mississippi, Missouri, Ohio, Pennsylvania, Tennessee, Texas, Utah, and Virginia, with California treated as a hybrid. The list shifts and California’s treatment is unusual, so verify against a current state source before you rely on it.

How Do You Determine If You Have Sales Tax Nexus?

Compare where your business has presence and sales against each state’s triggers. Work through this checklist.

1. Map your physical footprint. List every state with offices, employees (including remote), contractors, or equipment. Pull your FBA Inventory Event Detail report to see which states hold your stock.
2. Pull 12 to 24 months of sales by state. Compare gross sales and transaction counts against each state’s threshold and measurement period.
3. Split marketplace sales from direct sales. Check each state’s rule on whether marketplace sales count toward your direct threshold.
4. Review affiliate and referral agreements with in-state parties.
5. Check the registration timing rule in each triggered state.
6. If you find back exposure, do not register yet. Evaluate a voluntary disclosure agreement first, covered in the next section.

What Should You Do Once You Have Nexus?

Register, collect, file, remit, keep records, and keep watching thresholds. Run the sequence in that order.

1. Register for a permit before collecting. Collecting sales tax without a permit is illegal in most states. Timing varies. Texas gives a grace window: a remote seller crossing the $500,000 safe harbor must obtain a permit and begin collecting no later than the first day of the fourth month after the month it crosses, under 34 Texas Administrative Code (TAC) Section 3.286, per the Texas Comptroller. California requires collection immediately once you exceed $500,000 in the calendar year, per CDTFA. Check the DOR the day you cross.
2. Collect the correct rate. Apply destination or origin sourcing and add state plus local rates.
3. File and remit on the state’s schedule. States assign monthly, quarterly, or annual filing by volume. Zero-due returns are still required once you are registered.
4. Keep records for 3 to 6 years. Retain invoices, returns, remittance confirmations, and exemption certificates. See the Streamlined Sales Tax exemption certificate resource for the multistate form.
5. Monitor law changes. Thresholds move. Re-run the nexus check at least once a year.

What If You Already Crossed a Threshold Months Ago?

A voluntary disclosure agreement (VDA) lets an unregistered business come forward on better terms. In exchange for filing returns and paying past-due tax plus interest, you get a limited lookback, commonly three to four years, and a waiver of penalties, per the Multistate Tax Commission (MTC) Multistate Voluntary Disclosure Program. The catch is timing. Prior contact from a state about a tax type, including a filed return, a tax payment, or a state inquiry, disqualifies you. You must apply before the state contacts you.

What Are the Sales Tax Nexus Rules for Online Sellers?

Online sellers face all five nexus types at once, and the platform mix decides who collects. The details depend on your channels.

Marketplace-only sellers get collection handled by the platform, but registration and filing duties can remain, and any direct-channel sales are always yours. FBA sellers hold physical nexus wherever Amazon stores their inventory, regardless of who collects the tax. Shopify sellers collect on their own store’s sales, because Shopify is not a marketplace facilitator. Multichannel sellers face the hardest question: marketplace sales may or may not count toward the economic threshold for direct sales, and the answer changes state by state.

Here is the honest read. A US-only seller on a single marketplace channel may have genuinely light obligations. Multichannel selling is where exposure compounds, because each channel and each state stacks its own rule.

How Commenda Tracks Your Sales Tax Nexus

Commenda’s global indirect tax software monitors your physical and economic nexus across every state, flags threshold crossings before they become liabilities, and handles registration and filings. It runs your historical transaction data through a tax engine to pinpoint when and where you crossed, then tells you where to register, where to wait, and where you never needed to file.

Use the Commenda US nexus exposure guide for current state thresholds, and the Commenda sales tax calculator for rate lookups once you know where you collect. Commenda connects to your billing and ERP stack through 100+ integrations, so sales-by-state data flows in automatically.

Book a demo call to get your free nexus exposure assessment.