Sell a product online to a customer in another state, and you may owe that state sales tax — even if you have never set foot there. Since the Supreme Court’s 2018 South Dakota v. Wayfair decision, states can require out-of-state sellers to collect sales tax based on sales volume alone. For e-commerce businesses, understanding sales tax nexus by state is no longer optional. Here is how nexus works in 2026 and what to do about it.
Table of Contents
- What Sales Tax Nexus Means
- Physical Presence Nexus
- Economic Nexus: Thresholds by State
- Marketplace Facilitator Laws
- How to Determine Where You Owe Tax
- Compliance Steps: Registration to Filing
- Key Takeaways
What Sales Tax Nexus Means
“Nexus” is simply a sufficient connection to a state that obligates you to collect and remit its sales tax. Before Wayfair, nexus generally required physical presence — an office, warehouse, or employee in the state. The Court ruled that economic activity alone can create nexus, opening the door for every state with a sales tax to impose collection duties on remote sellers.
Today, all states with a statewide sales tax have economic nexus laws. The five states with no statewide sales tax — Alaska, Delaware, Montana, New Hampshire, and Oregon — do not impose these obligations (though Alaska allows local sales taxes). If you sell taxable goods or services into the other 45 states plus D.C., nexus rules apply to you.
Physical Presence Nexus
Physical presence still creates nexus instantly, with no minimum threshold. You have physical nexus in a state if you maintain an office, store, warehouse, or inventory there — including inventory in a third-party fulfillment center, which surprises many online sellers. Employees or contractors working in the state, regular in-state deliveries with your own vehicles, and trade-show attendance beyond a state’s safe-harbor days can also trigger it.
Drop-shipping arrangements deserve attention: if your supplier ships from a warehouse in a state on your behalf, most states treat that inventory presence as your nexus. Map every place your goods sit or your people work before you assume you only owe tax at home.
Economic Nexus: Thresholds by State
Economic nexus is triggered when your sales into a state exceed its threshold, typically measured over the prior or current calendar year. The most common thresholds are $100,000 in sales or 200 transactions, though specifics vary: some states use only a sales-dollar test, some count only taxable sales, and a few set higher dollar amounts. Several states have dropped their transaction-count tests entirely, relying on revenue alone.
Thresholds change, so verify each state’s current numbers on its department of revenue website before making decisions — the USA.gov state tax directory links to every state’s tax agency. Track your sales by destination state continuously; crossing a threshold mid-year generally obligates you to register and collect prospectively from that point forward.
Marketplace Facilitator Laws
If you sell only through marketplaces like Amazon, eBay, Etsy, or Walmart, there is good news: every state with a sales tax now has a marketplace facilitator law requiring the platform to collect and remit tax on your marketplace sales. In that scenario, you generally do not need to collect on those transactions yourself.
The catch is multi-channel selling. If you also sell through your own Shopify or WooCommerce store, the marketplace sales may still count toward economic nexus thresholds in some states, and your direct sales definitely create collection duties once nexus exists. Many sellers discover they owe tax on their own-site sales in states where the marketplace was handling everything else.
How to Determine Where You Owe Tax
- List every state where you have physical presence (offices, inventory, employees, contractors).
- For all other states, tally sales by destination over the trailing 12 months against each state’s threshold.
- Check marketplace facilitator coverage for your marketplace-only sales.
- Confirm which of your products are taxable in each nexus state — taxability of clothing, software, and digital goods varies widely.
- Note states’ differing rules on whether exempt or marketplace sales count toward thresholds.
This analysis is worth repeating at least annually, or whenever you add a sales channel or fulfillment location. Sales tax software can automate the tracking and alert you as you approach thresholds. Getting this right early also simplifies hiring your first employee in a new state, since nexus and payroll registrations often go hand in hand.
Compliance Steps: Registration to Filing
Once nexus exists in a state, register for a sales tax permit before you start collecting — collecting without a permit is illegal in most states. Configure your cart or marketplace to charge the correct rate, which may include state, county, city, and special-district taxes depending on whether the state uses origin or destination sourcing. File returns on the schedule the state assigns (monthly, quarterly, or annually based on volume), and remit the tax you collected.
Keep exemption certificates for any wholesale or resale customers, and maintain records for at least three to four years. Penalties and interest for non-compliance compound quickly, and states are increasingly using data-sharing to find unregistered remote sellers. When in doubt, a sales tax professional or automated compliance service pays for itself — and keeping clean financial records makes every filing easier. Multi-state sellers should also review how state tax policy debates could shift thresholds and rates in the years ahead.
