Sales tax economic nexus rules vary by state, but the common pattern is this: once your sales into a state exceed a set dollar threshold in a year, you have to register there and start collecting sales tax, even if you have no office, warehouse, or employees in the state. The most common trigger is $100,000 in annual sales. A handful of states set the bar at $500,000, a few require both a dollar figure and a transaction count, and five states (Alaska, Delaware, Montana, New Hampshire, and Oregon) have no statewide sales tax at all, so the question doesn’t arise there for most sellers.
These rules took effect after the Supreme Court’s 2018 decision in South Dakota v. Wayfair, Inc., which overturned the older rule that a business had to have a physical presence in a state before that state could require it to collect sales tax. The Court accepted South Dakota’s law as a workable model: a safe harbor for small sellers, no retroactive application, and standardized rules through the Streamlined Sales and Use Tax Agreement. Most states drafted their own laws to look like South Dakota’s, which is why the $100,000 figure is so widespread.
The Standard $100,000 Threshold
In most states with a sales tax, you trigger economic nexus once your sales into the state cross $100,000 in a year. Cross that line and you have to register for a sales tax permit and begin collecting on subsequent sales. Some states pair the dollar figure with an alternative transaction-count trigger, typically 200 transactions, meaning you’d owe once you hit either number. Florida uses a straight $100,000 sales threshold with no transaction count. Kansas applies a $100,000 threshold based on cumulative gross receipts from sales to Kansas customers in the current or preceding calendar year.
States That Break the Pattern
A few states set higher thresholds or add extra conditions:
- California. $500,000 in sales during the preceding or current calendar year. The higher limit effectively exempts smaller remote sellers.
- Texas. A safe harbor protects sellers with less than $500,000 in total Texas revenue over the preceding twelve calendar months. Texas measures gross revenue from all sales of tangible personal property and services into the state, including nontaxable sales and sales for resale. No transaction-count trigger.
- New York. You must exceed both $500,000 in gross receipts and 100 transactions during the preceding four sales tax quarters. Hitting only one does not trigger a collection obligation. The look-back runs on quarters ending the last day of February, May, August, and November, which differs from the calendar-year cycle most states use.
- Connecticut. Both conditions must be met: $100,000 in gross receipts and 200 transactions in the prior twelve-month period. Crossing only one threshold does not require registration.
If you sell into California, Texas, or New York, you have real room before you owe. In Connecticut, a low-volume seller shipping many small orders needs to watch both counters, because either one alone leaves you off the hook.
The Disappearing Transaction Count
When states first adopted economic nexus laws, most copied South Dakota’s original two-trigger structure: a dollar amount or a transaction count. That second trigger has been steadily abandoned. At least fifteen states have eliminated it, including South Dakota itself (effective July 2023), Indiana (January 2024), North Carolina (July 2024), Utah (July 2025), Alaska (January 2025), and Illinois (January 2026).
The practical effect matters if you sell high volumes of inexpensive items. Under a transaction-count trigger, 201 orders worth a combined $3,000 could force you to register. With that trigger gone, only the dollar volume decides. You still need to check which states retain the count, because in those a busy holiday season can push you over on its own.
What the State Actually Counts
States don’t all measure the same pool of revenue when deciding whether you’ve crossed the threshold. Three approaches are in use:
- Gross sales. The broadest measure. All revenue from sales into the state counts, whether the sales are taxable, exempt, or made for resale. Roughly half the states use this approach. Texas is a prominent example: wholesale and exempt sales both count toward the $500,000 figure.
- Retail sales. Excludes sales for resale but includes everything sold to end consumers, taxable or not. New York, Ohio, and Georgia use this measure.
- Taxable sales. The narrowest measure. Only sales that would actually be subject to sales tax count. Florida, Missouri, and Pennsylvania take this approach, which can delay when a seller reaches the trigger.
Getting this wrong cuts both ways. Count too broadly in a taxable-sales state and you may register earlier than you need to, adding compliance costs. Count too narrowly in a gross-sales state and you’ll miss your registration deadline. When you’re evaluating exposure in a new state, the question isn’t just how much you sold there. It’s what that state counts as a sale.
Look-Back Periods and When You Start Collecting
The window states use to measure your sales varies. Most use either the current calendar year or the preceding calendar year, and crossing the threshold in either one triggers the obligation. Texas uses a rolling twelve-month window, so the measurement period shifts each month. New York’s four-quarter look-back is yet another variation.
Once you cross a threshold mid-year, the obligation to register and begin collecting generally kicks in for sales going forward, not retroactively. The tax on sales that pushed you over the line usually isn’t owed. Every sale after that point is. The South Dakota law upheld in Wayfair prohibited retroactive application, and most state laws follow that model.
Accurate records by state are essential. What matters is the shipping destination of each order, not your business location, because the customer’s state is what determines where nexus applies. If you sell through multiple channels, you need to aggregate data from your own site, marketplace platforms (in states that include those sales), phone orders, and any other source.
Marketplace Sales
Every state with a sales tax has adopted some form of marketplace facilitator law. These laws shift the collection and remittance responsibility to the platform hosting the sale, covering marketplaces like Amazon, Etsy, eBay, and Walmart’s third-party platform. If you sell exclusively through a marketplace facilitator, the platform handles tax collection and remittance in those states.
Whether your marketplace sales count toward your own economic nexus threshold varies. In roughly half the states, they’re included when calculating whether you’ve crossed the line. In the other half, they’re excluded. The distinction matters most if you sell through both a marketplace and your own website. In an “included” state, your combined total from all channels counts. In an “excluded” state, only your direct sales matter for nexus purposes.
Even when a marketplace collects tax for you, you may still need a sales tax permit if you make direct sales outside the platform or conduct other taxable transactions the facilitator doesn’t cover. Sellers who rely entirely on a single marketplace in a state that excludes those sales from the nexus calculation may have no obligation to register, but that changes the moment they make a single direct sale.
Digital Products and SaaS
Economic nexus thresholds apply to sales of digital products and software-as-a-service in many states, but taxability varies widely. Roughly half the states with a sales tax treat SaaS as taxable in some form, while others classify it as a nontaxable service. The classification often depends on whether the state views cloud-delivered software as tangible personal property, a digital good, or a service.
This produces a two-step analysis. First, determine whether you’ve crossed the nexus threshold. Second, figure out whether what you’re selling is even taxable there. You could have clear nexus in a state that doesn’t tax your product, meaning you’d need to register and file returns showing zero tax due. Skipping the registration because you believe your product is exempt is a common and costly mistake.
Registering and Filing Once You Cross
If you need to register in several states at once, the Streamlined Sales Tax Registration System lets you submit a single application covering all participating member states. There’s no fee for the system itself, though individual states may charge their own registration fees. Most states charge nothing to register. About a dozen do, generally $5 to $100: Colorado charges $63, Connecticut $100, Washington $90, and South Carolina $50. Processing times run from same-day online issuance to two or three weeks. You’re expected to start collecting on the date your obligation begins, not the date your permit arrives, so plan ahead if you’re approaching a threshold.
Once you hold a permit, you file on the schedule the state assigns, even during periods when you have zero sales there. Missing a return because you had no activity is a common way to rack up penalties. States assign frequency based on your volume, and can bump you from quarterly to monthly as sales grow. Check your assigned frequency at least annually.
Local Taxes on Top
State-level compliance is only part of the picture. Many states let cities, counties, or special districts impose their own sales taxes on top of the state rate. In most states, the state handles collection and distribution of local taxes, so registering at the state level covers you. A handful of states have “home-rule” cities that administer their own tax independently. Colorado is the most prominent example: home-rule cities set their own rates, define their own taxable goods and services, and may require separate registration. Colorado has centralized some of this through a single state portal, but home-rule cities still keep the right to establish their own rules.
What Happens If You Ignore the Rules
Missing an economic nexus obligation doesn’t make it go away. States pursue back taxes, penalties, and interest from businesses that should have been collecting but weren’t. You owe the tax you should have collected from customers, plus penalties and interest on top. Since the tax was supposed to come from buyers, you’re effectively paying it out of your margins.
Late-filing penalties commonly run 5% per month of the unpaid tax, capping at 25%. Interest accrues on top, often at 6% to 12% annually depending on the state. Some states add separate penalties for failing to register at all. West Virginia, for example, charges $50 per month for every month a business operates without a license after its collection obligation begins. Several states offer voluntary disclosure agreements that let you come into compliance with reduced penalties and a limited look-back, which is worth exploring if you’ve been selling into a state for years without collecting.