Every state that collects a sales tax has state nexus tax laws and thresholds that reach out-of-state sellers, and the most common trigger is $100,000 in annual sales into the state. That covers 45 states plus the District of Columbia for sales tax. Income tax and gross receipts tax nexus run on separate thresholds and can catch a business that has no sales tax obligation at all.
Sales Tax Economic Nexus Thresholds
After the Supreme Court’s 2018 decision in South Dakota v. Wayfair, Inc., every sales-tax state adopted an economic nexus rule that lets it require collection from remote sellers based purely on in-state sales activity.1Cornell University Law School / Legal Information Institute (LII). South Dakota v. Wayfair, Inc. No office, warehouse, or employee is required.
The default threshold across most states is $100,000 in gross revenue or 200 separate transactions in a calendar year. The trend since 2018 has moved away from the transaction count. As of 2026, fewer than 20 states still use a transaction-based trigger at all; the rest rely solely on the dollar figure.
Several large-market states set a higher bar. California, New York, and Texas each require $500,000 in sales before collection duties begin. New York adds a requirement of at least 100 transactions on top of that dollar figure.
Once you cross a state’s threshold, you have to register for a sales tax permit, start collecting tax on sales into that state, and file periodic returns. The obligation applies regardless of where your business is headquartered. Filing periods with no tax collected still generally require a zero return.
What Sales Count Toward the Threshold
The dollar figure alone does not tell you whether you have crossed a threshold. Each state defines what sales it counts, and the definitions differ enough to change the answer. A company with $400,000 in total sales into a state but only $95,000 in taxable sales might exceed a gross-sales threshold while sitting well under a taxable-sales threshold.2Streamlined Sales Tax. Remote Seller Threshold Terms
States using a gross sales standard count everything: taxable sales, exempt sales, and wholesale transactions. A retail sales standard excludes sales for resale but still counts sales that happen to be exempt for other reasons, such as groceries in states that exempt them. A few states count only taxable sales, the narrowest measure, which excludes anything sold under an exemption certificate. Checking which definition each state uses is one of the first steps in estimating your exposure.
States Without a Sales Tax
Five states impose no statewide sales tax: New Hampshire, Oregon, Montana, Alaska, and Delaware. Sellers shipping into these states generally face no state-level economic nexus for sales tax purposes.
Alaska is the exception. The state itself collects no sales tax, but local boroughs and cities can and do. The Alaska Remote Seller Sales Tax Commission coordinates collection for participating local jurisdictions, so remote sellers with enough Alaska customers may still need to register through the commission. The other four states have no comparable local sales tax systems affecting remote sellers.
Physical Presence Still Triggers Nexus
Economic thresholds do not replace physical presence rules. A business under every dollar threshold can still owe sales tax if it has a tangible connection to the state. An office, a retail location, or a manufacturing facility all qualify. Even leasing temporary space for a trade show or pop-up can count.
Employees and Remote Workers
Hiring even one person who works in a state typically creates nexus for the employer, regardless of that employee’s role. A remote software developer working from their home in a state where you have no customers still anchors your business to that state’s tax system. The employee does not need to generate any revenue in the state for nexus to attach.
Inventory and Fulfillment Centers
Storing goods in a state creates nexus even if you do not own the warehouse. Businesses using third-party fulfillment services that spread inventory across regional hubs often discover this late. If your products sit in a warehouse in a state, that state treats you as physically present. Knowing exactly which states hold your inventory at any given time matters.
Independent Contractors
Using 1099 contractors in a state can create nexus in much the same way employees do. If a contractor installs equipment, conducts training, or performs on-site services on your behalf, many states treat that activity as your physical presence. The analysis turns on what the contractor does and where, not on the tax form. For income tax specifically, federal law provides a narrow carve-out: independent contractors soliciting orders for tangible goods generally do not create income tax nexus for the principal.3Office of the Law Revision Counsel. 15 US Code 381 – Imposition of Net Income Tax
Marketplace Facilitator Relief
Every sales-tax state has enacted marketplace facilitator legislation, which shifts collection duties from individual sellers onto the platform. If you sell through Amazon, Etsy, Walmart Marketplace, or a similar site, the marketplace collects and remits sales tax on the transactions it facilitates. Most small online sellers get a real compliance break here.
The relief has limits. Direct sales through your own website, at craft fairs, or through any channel that is not a registered marketplace facilitator remain your responsibility. Your total sales into a state, including marketplace-facilitated sales, still count toward the economic nexus threshold in most states. That can trigger a registration obligation even where you have no tax to remit on the marketplace transactions themselves.
Click-Through and Affiliate Nexus
Roughly 15 states still maintain click-through or affiliate nexus laws. These target businesses using in-state partners to drive online sales, treating a commission-earning referral site or a commonly owned in-state entity as your presence in the state. Economic nexus now overlaps most of what these laws once did, but they remain on the books and can occasionally catch a seller sitting just below a state’s dollar threshold.
Income Tax Nexus Thresholds
Income tax nexus runs on its own rules and can apply even where sales tax nexus does not. A separate review is required for each state.
Factor Presence Standard
Many states follow the Multistate Tax Commission’s factor presence model. Under it, a business has income tax nexus if it exceeds any one of four thresholds during a tax period: $50,000 of property in the state, $50,000 of payroll in the state, $500,000 of sales in the state, or 25 percent of its total property, payroll, or sales.4Multistate Tax Commission. Factor Presence Nexus Standard for Business Activity Taxes These figures have stayed unchanged since the MTC adopted the model in 2002. Not every state uses the framework verbatim, but it is the most common bright-line income tax nexus test nationwide.
Gross Receipts Taxes
Several states impose gross receipts taxes instead of, or alongside, a corporate income tax. These apply to total revenue rather than net profit, so they hit businesses even in losing years, and each carries its own nexus threshold:
- Ohio’s Commercial Activity Tax applies at 0.26 percent on taxable gross receipts above $1 million, with a registration threshold of $150,000 in Ohio receipts.
- Washington’s Business and Occupation Tax kicks in at $100,000 in combined gross receipts sourced to the state.
- Nevada and Texas also use gross receipts structures with their own rules.
These thresholds do not necessarily mirror the sales tax or income tax standards in the same state.
States Without a Corporate Income Tax
Nine states impose no individual income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. No income tax does not always mean no business tax, though. Texas has no corporate income tax but imposes a franchise tax based on revenue. Washington has no income tax but applies its B&O tax broadly. What the tax is called matters less than what you actually owe.
The P.L. 86-272 Income Tax Shield
Federal law offers one narrow shield. Public Law 86-272 prevents a state from imposing a net income tax on a business whose only in-state activity is soliciting orders for tangible personal property, where orders are sent out of state for approval and fulfilled from outside the state.3Office of the Law Revision Counsel. 15 US Code 381 – Imposition of Net Income Tax Sales reps visiting a state, handing out catalogs, and taking orders for physical goods fit inside the protection.
The shield is narrower than it looks. It does not cover services, digital goods, software subscriptions, or licensing. It does not touch sales tax. And the MTC’s 2021 revised guidance identifies internet-era activities that break the safe harbor, such as placing cookies on in-state customers’ devices to gather data used for product development or inventory decisions. Streaming digital content is not a sale of tangible personal property and falls outside the protection entirely.5Multistate Tax Commission. Statement on Public Law 86-272 Cookies that only remember cart contents or login information stay on the safe side. Most modern e-commerce businesses do enough digital activity to lose the protection in at least some states.
A business fully protected from income tax under P.L. 86-272 can still be required to collect sales tax in the same state. The two analyses are independent.6Multistate Tax Commission. Statement of Information Concerning Practices Under Public Law 86-272
If You Have Already Crossed a Threshold
Discovering you should have been collecting tax in a state for years is unsettling, but doing nothing is the worst move. Most states participate in the Multistate Tax Commission’s voluntary disclosure program, which lets a business come forward, register, and settle its past liability on much better terms than it would get if the state found it first.
Two benefits drive most VDAs: penalty relief and a limited lookback period. Instead of assessment for every year of non-compliance, the state agrees to limit back taxes to a set number of prior periods. For income and franchise taxes, the typical lookback is three to four complete prior tax years. For sales and use taxes, it is usually 36 to 48 months, with a few states extending to 60 months.7Multistate Tax Commission. Lookback Periods for States Participating in National Nexus Program Back taxes and interest are still owed for those periods, but penalties are partially or fully waived, and earlier periods are off the table.
Eligibility requires that the business has not previously filed returns in the state, has not been contacted by the state about the liability, and is not already under audit.8Multistate Tax Commission. Frequently Asked Questions – Multistate Voluntary Disclosure Program Once a state sends a notice, the window closes. If you suspect a nexus problem, the difference between self-reporting and being discovered can be tens of thousands of dollars in waived penalties and eliminated lookback years.