Quick answer

State nexus for remote sellers is the legal connection that lets a state require you to register for a seller’s permit, collect sales tax, and file returns. That connection can be physical (offices, warehouses, employees) or economic (sales dollars or number of transactions). After the U.S. Supreme Court’s 2018 Wayfair decision, most states adopted economic nexus rules; you should register as soon as you cross a state’s published threshold or create a physical presence there (see examples below).

How nexus rules work in practice

States use multiple tests to determine nexus. The two most common are:

  • Physical nexus: any tangible presence in the state—a store, warehouse, inventory stored with a third-party fulfillment center (in some states), an employee or contract worker, or regular service visits. Physical presence usually creates immediate registration and collection duties.
  • Economic nexus: a threshold based on in-state sales dollars or the number of transactions. Once your remote sales exceed that threshold during the state’s lookback period (usually the prior 12 months), you must register and collect sales tax.

Both can apply simultaneously. For example, an Ohio-based seller that stores inventory in a New Jersey fulfillment center may have physical nexus in New Jersey even if its sales volume there is small. Conversely, a seller with no physical presence might still have nexus in states where its online sales exceed the economic threshold.

In my practice advising e-commerce companies, I often see confusion about inventory in third-party warehouses. Some states treat inventory stored in a fulfillment network (for example, Amazon FBA) as creating physical nexus; others do not. That distinction is an immediate registration trigger in the first group of states.

Examples of economic thresholds (as of 2025)

Thresholds vary by state and change over time. Common examples include:

  • California: $500,000 in annual sales (retail sales of tangible goods) — check California Department of Tax and Fee Administration guidance.
  • Texas: $500,000 in annual sales.
  • New York: $500,000 in sales and more than 100 sales transactions.
  • Florida: $100,000 in annual sales.
  • Illinois: $100,000 in sales or 200 transactions.

These figures are representative of state approaches after the Wayfair ruling. Always confirm the current threshold on each state’s tax agency website or a reputable tracking source such as the Tax Foundation or your tax advisor (see Sources). Do not assume one national standard applies.

Marketplace facilitators and third-party platforms

Most states now require marketplace facilitators (Amazon, eBay, Etsy, etc.) to collect and remit sales tax on behalf of third-party sellers for marketplace sales. That often relieves the individual seller of collection duties for those marketplace transactions, but it does not always remove registration obligations for other sales (for example, direct sales via your website). Review state law to see whether marketplace-collected tax fully satisfies your obligations or whether you still need a seller’s permit.

For guidance, consult your marketplace’s tax policy and the state’s marketplace facilitator rules.

Registration: when and how to file

If you meet nexus in a state, follow these steps:

  1. Confirm the nexus trigger (physical location, inventory, employees, economic threshold, or marketplace sales).
  2. Register with the state tax authority for a seller’s permit or sales tax account number. Most states allow online registration; some require a paper application or additional documentation.
  3. Collect the correct sales tax rate for each transaction. Remember rates can include state, county, local, and district taxes.
  4. File returns and remit taxes on the state’s required schedule (monthly, quarterly, or annually). States will indicate due dates and lookback periods.

Pro tip from my practice: document the date you crossed a threshold and keep a month-by-month sales ledger for each state. That record is essential if a state asks for back taxes or if you negotiate a voluntary disclosure.

Filing periods and back tax exposure

States set the reporting frequency (monthly, quarterly, annual) based on your expected tax liability. Failing to register and collect can lead to penalties, interest, and assessments on historical sales. Many states permit voluntary disclosure agreements (VDAs) that limit the lookback period for unregistered sellers who come forward voluntarily and agree to register and comply going forward. VDAs often reduce penalties but have conditions — consult a tax professional before filing.

Special situations that commonly create nexus

  • Inventory stored in third-party warehouses or fulfillment centers (varies by state).
  • Remote employees, sales reps, or contractors working in a state.
  • Regular installation, maintenance, or on-site services in the state.
  • Digital goods and SaaS: taxable status varies by state; some states tax digital products, others do not.
  • Affiliate relationships and referral arrangements can create nexus in some states.

Each situation requires a fact-based review. For digital businesses, see our related guides: Nexus for Digital Businesses: When States Can Tax Your Services and State Tax Nexus Considerations for SaaS and Digital Service Providers.

Practical compliance checklist

  • Track gross sales and number of transactions by state on a rolling 12-month basis.
  • Inventory: map where goods are stored (including in third-party fulfillment centers).
  • Employees/contractors: list locations of work performed outside your home state.
  • Marketplaces: identify which sales are marketplace-collected vs. direct sales.
  • Register promptly in states where you meet nexus; keep registration records.
  • Set up tax collection in your checkout system to apply correct rates.
  • File returns and remit tax on schedule; consider automation or tax engines for large volumes.

For a deeper dive on economic nexus principles, see our glossary entry on Economic Nexus.

Common mistakes and how to avoid them

  • Assuming low sales volume means no nexus: low-ticket, high-transaction sellers can trigger transaction-count thresholds.
  • Ignoring marketplace nuances: marketplaces may collect tax, but you may still owe use tax or need registration for other sales.
  • Overlooking local district taxes: the combined rate can be materially higher than the state rate.
  • Waiting for a notice: states may assess back taxes retroactively; a voluntary disclosure is usually better than being audited.

When to get professional help

If you operate in multiple states, use fulfillment networks, or sell digital services, consult a state tax specialist or CPA. In my advisory work, I recommend an annual nexus review and automated monthly reporting to catch threshold crossings quickly. A specialist can also negotiate VDAs when back tax exposure appears.

FAQ (short)

Q: How do I know exactly when to register?
A: Register when you meet a state’s nexus test (physical presence or economic threshold) as defined by that state’s tax authority. Keep contemporaneous records — states will look for dates when thresholds were crossed.

Q: Do marketplace sales always relieve me of registration?
A: Not always. Marketplace facilitator collection often covers the marketplace transactions, but you may still need to register for non-marketplace sales or for reporting reasons. Review the state rule and marketplace policy.

Q: Can I get credit for taxes paid to another state?
A: For use taxes on goods, states typically allow crediting taxes paid to other jurisdictions in limited income/franchise contexts. Sales tax is collected at point of sale — consult a tax advisor for cross-jurisdiction credits.

Professional disclaimer

This article provides general information about state nexus and compliance for remote sellers and does not constitute tax, legal, or accounting advice. Rules vary by state and change over time. Consult a qualified tax professional or the state tax authority for guidance specific to your facts.

Sources and authoritative references

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