State nexus laws are the rules that decide when your business has a strong enough connection to a state that the state can require you to register, collect sales tax, or file an income tax return there. Since the Supreme Court’s 2018 decision in South Dakota v. Wayfair, Inc., that connection no longer requires a physical footprint; economic activity alone can trigger obligations.1Supreme Court of the United States. South Dakota v. Wayfair, Inc. Nexus now comes in four main varieties: physical presence, economic activity, affiliate and click-through relationships, and marketplace facilitation. Five states impose no statewide sales tax at all: Alaska, Delaware, Montana, New Hampshire, and Oregon. The remaining 45 plus the District of Columbia each set their own rules, and the rules do not line up.
Physical Presence Nexus
Physical presence is the oldest and most intuitive trigger. An office, a retail location, a warehouse, or a single employee working from a home office in the state is enough. So is inventory. If you use a third-party fulfillment service that distributes your products across warehouses in multiple states, you may have physical nexus in every state where your goods sit on a shelf, whether or not you chose those locations.
Regular in-state activity by traveling salespeople or repeated trade show attendance can also create physical nexus. Where the exact threshold sits varies by state, and the safest working assumption is that recurring physical activity in a state creates nexus there.
Economic Nexus Thresholds
Economic nexus is the change most remote sellers need to understand. Every state that imposes a sales tax has adopted some version of it since Wayfair. The most common threshold is $100,000 in annual sales into the state. Some states originally paired that with a transaction count, typically 200 separate sales, but roughly half of the states with economic nexus laws have since eliminated the transaction trigger and kept only the dollar figure. A few states set higher dollar thresholds; a few set lower ones.
The variation matters. A business selling high-value items to a small number of customers could clear $100,000 in sales without approaching 200 transactions. A business selling low-priced items could hit the transaction count long before the dollar mark.
What Counts Toward the Threshold
Some states measure gross sales, meaning wholesale, exempt sales, and even nontaxable services all count. A business that sells mostly to resellers or in exempt products may never owe tax to that state yet still be required to register and file because gross receipts crossed the line. Other states count only taxable retail sales, which gives wholesale-heavy businesses more room. Getting this wrong in either direction creates problems: registering too early wastes administrative work, registering too late exposes you to back taxes and penalties.
Measurement Periods and Registration Deadlines
States use different timeframes to measure whether you have crossed. Some look at the current or previous calendar year. Others use a rolling 12-month period or the prior four sales tax quarters. You can trigger nexus mid-year and owe registration almost immediately after. Some states require registration within 30 days of exceeding the threshold, with collection beginning shortly after. Missing that window does not excuse you from the obligation. It just means you owe back taxes from the date you should have started collecting.
Affiliate and Click-Through Nexus
Economic nexus gets most of the attention, but two older tools still sit on state books.
Click-through nexus targets online retailers that pay commissions to in-state residents or businesses for referring customers through website links. Once referrals from in-state affiliates cross a threshold, often around $10,000 in referred sales over a set period, some states treat the arrangement as equivalent to having a salesperson in the state. The retailer can sometimes rebut that presumption by showing the affiliate was not actively soliciting, but the burden falls on the retailer. Since economic nexus captures most of the same businesses, some states have repealed their click-through provisions.
Affiliate nexus looks at corporate relationships rather than individual referrals. If an out-of-state retailer shares ownership, branding, or management with a company that has a physical presence in the state, the in-state entity’s presence can be attributed to the remote seller. Common triggers include using an in-state affiliate to accept returns, perform warranty repairs, or market products. These laws are aimed at businesses that use corporate structures to separate their sales operations from their physical operations.
Marketplace Facilitator Laws
Nearly every state with a sales tax now requires marketplace facilitators, meaning platforms like Amazon, eBay, and Etsy, to collect and remit sales tax on behalf of the third-party sellers who use them.2Streamlined Sales Tax Governing Board. Marketplace Facilitator The platform handles calculation, collection, and remittance for the sales that flow through it.
The relief is not total. If you sell both through a marketplace and through your own website, the facilitator handles only the marketplace sales. You are still responsible for direct sales in any state where you have nexus. Some states also require sellers to file returns even when the marketplace has collected everything, sometimes showing zero tax due, so the state can verify the facilitator remitted the right amount. Missing those informational returns can trigger penalties even when nothing is owed.
Nexus for Digital Goods and SaaS
Rules built around physical goods do not map cleanly onto software subscriptions, streaming, downloads, and cloud tools. Whether digital products are taxable at all varies by state. As of 2025, roughly 25 jurisdictions tax software-as-a-service in some form, but they define and categorize it differently. Some treat SaaS as a taxable service. Others classify it as a license of tangible personal property. Others exempt it entirely.
That inconsistency changes the analysis. A digital product can generate economic nexus obligations in one state and no tax liability in another after registering. A SaaS company with customers everywhere could be required to register, file, and collect in some states while remaining fully off the hook in others. A few states also distinguish between business-to-business and business-to-consumer SaaS. If you sell digital products, the first question is not just whether you have nexus but whether the product is taxable there at all.
Income Tax Nexus
Sales tax nexus and income tax nexus are separate frameworks, and a business can trigger one without the other. The Multistate Tax Commission developed a factor-presence standard that several states have adopted. Under that model, a business has income tax nexus if it exceeds any of the following in a state during a tax period: $50,000 in property, $50,000 in payroll, $500,000 in sales, or 25 percent of total property, payroll, or sales. States modify these amounts; some adopt only the sales factor, and the dollar figures vary.
The P.L. 86-272 Shield and Its Limits
Federal law offers one narrow protection. Under 15 U.S.C. ยง 381, a state cannot impose a net income tax on a business whose only in-state activity is soliciting orders for tangible goods that are approved and shipped from outside the state.3Office of the Law Revision Counsel. 15 US Code 381 – Imposition of Net Income Tax The protection is easy to overstate. It applies to income tax only, not sales tax, and to tangible personal property only. Services and digital products are excluded. It also disappears the moment a company does anything beyond solicitation, such as providing post-sale support or storing inventory in the state.
The Multistate Tax Commission has issued guidance treating many common digital activities as exceeding what P.L. 86-272 protects. Placing cookies on customers’ devices to gather data for product development, providing post-sale chat support, or letting customers create accounts that store personal information can all defeat the protection.4Multistate Tax Commission. Statement on PL 86-272 Cookies used only to remember cart contents or save login information for convenience remain protected, but the line is thin. A growing number of states follow this interpretation, so almost any modern e-commerce business with interactive website features may fall outside the shield.
Notice and Reporting Requirements
A few states maintain notice and reporting laws aimed at sellers with in-state customers who have not crossed the collection threshold. Under those rules, the seller must notify customers at checkout that sales tax was not collected and that the customer may owe use tax. The seller must also mail an annual purchase summary to each customer and, in some cases, report that data to the state.
These laws are an enforcement backstop. They give the state enough information to pursue use tax from the buyer, and the compliance burden is designed to push sellers toward simply registering. Penalties for missed notices are typically assessed per violation, meaning per customer or per transaction, so they add up quickly. The number of states relying on this approach has shrunk as economic nexus laws have become universal, but the rules still apply to sellers whose activity falls below economic nexus thresholds in certain jurisdictions.
Fixing Past Obligations Through Voluntary Disclosure
If you find you should have been collecting or filing in a state for years, quietly registering going forward leaves the back years open. Voluntary disclosure agreements offer a structured way to resolve those years on better terms than an audit would produce. Most programs limit the lookback to three or four years of back tax and waive penalties. Interest is usually still assessed in full, but avoiding penalties alone can save a significant amount.
The Multistate Tax Commission runs a national program that lets a business negotiate with multiple states through a single point of contact. Roughly 39 states participate, and taxpayers can approach it anonymously through a representative before committing to any specific state. Timing is the catch: once a state has identified you and asserted a liability, you generally lose access to voluntary disclosure. The “voluntary” part is taken literally, so if you suspect you have unfiled obligations in multiple states, starting the process before an audit notice arrives is the only way to preserve the reduced lookback and penalty waiver.
Registering and the Cost of Getting It Wrong
Once you determine you have nexus in a state, registering for a sales tax permit is usually straightforward. Most states charge nothing. A handful charge fees ranging from about $10 to $100, with most of those falling under $60. The Streamlined Sales Tax Registration System offers a free, centralized way to register in multiple participating states through a single application.5Streamlined Sales Tax. Sales Tax Registration SSTRS Registration through Streamlined does not grant amnesty for past-due tax; it covers you going forward only. Filing returns is done directly with each state.
Penalties for late registration and failure to collect follow a consistent pattern. States charge a percentage of the tax that should have been collected, plus interest running from the date the obligation arose. Late-filing penalties of 5 to 30 percent of the tax due are common, and minimum penalties apply even when no tax is owed. Audit lookback periods typically run three to four years and can extend further if the state believes a business deliberately avoided compliance. Clean records of every transaction, including which sales a marketplace facilitator handled and which were direct, are the single best defense if an audit arrives.