Overview
Sales tax nexus determines when a remote-first business must register with a state and start collecting sales tax from customers there. The U.S. Supreme Court decision in South Dakota v. Wayfair, Inc. (2018) allowed states to require collection by remote sellers based on economic presence rather than physical location, which reshaped nexus rules nationwide. For state-by-state updates and summaries, see the National Conference of State Legislatures (NCSL) sales tax resource center (https://www.ncsl.org) and state tax agency guidance.
How nexus is commonly triggered
- Physical presence: offices, employees, inventory, or a warehouse in a state. Even occasional in-person work can create obligations. In our work advising remote firms, client travel for multi-day onsite projects sometimes necessitated registration.
- Economic nexus: many states set thresholds based on dollars of sales or number of transactions into the state (for example, $100k–$500k or 100 transactions). These thresholds vary and change, so verify current rules for each state.
- Marketplace facilitator laws: most states now place collection responsibility on marketplaces (e.g., Amazon, Etsy) rather than every individual seller — but sellers should confirm how a marketplace reports and whether they still need to register.
- Click-through and referral nexus: payouts to in-state affiliates or referral partners can sometimes create nexus under state rules.
Practical examples (illustrative, check current state law)
| State | Typical nexus trigger (example as of 2025) |
|---|---|
| California | Economic nexus: $500,000 in sales into the state |
| New York | Economic nexus: $500,000 in sales and 100 transactions |
| Texas | Economic nexus: $500,000 in sales |
Steps for remote-first businesses to manage nexus
- Map sales by state: run regular reports showing receipts and number of transactions by state.
- Compare to state thresholds: use NCSL and state tax agency sites for up-to-date thresholds and rules.
- Register where required: register for a sales tax permit in each state where you have nexus and comply with filing frequencies.
- Automate collection: consider sales tax software to apply the correct rates, exemptions, and product taxability automatically.
- Keep records: retain sales logs, exemption certificates, and registration confirmations—these help if a state audits prior periods.
- Consult a pro: for multi-state exposure, work with a CPA or sales tax specialist to minimize back tax risk and manage voluntary disclosure agreements when needed.
Common pitfalls we see
- Assuming only physical presence creates nexus. Economic and marketplace rules commonly apply today.
- Treating thresholds the same across states. Each state’s test differs for products vs. services and digital goods.
- Relying solely on marketplaces. If your product is sold outside a marketplace channel, you may still have direct obligations.
Tools and internal resources
- Use automation and compliance platforms to keep rates and nexus rules current. See our review of Sales Tax Compliance Automation: Tools for Small E-commerce Businesses for options and trade-offs.
- For service providers and digital sellers, read our pieces on Sales Tax Compliance for SaaS Businesses and State Sales Tax Nexus: Practical Tests for Remote Sellers in 2025 for targeted guidance.
Checklist: Quarterly actions
- Pull state-by-state sales and transaction reports.
- Reconcile marketplace reports with your records.
- Confirm registrations and upcoming filing deadlines.
- Update tax automation settings for new products or regions.
Authoritative sources and further reading
- South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018).
- National Conference of State Legislatures — Sales Tax Resource Center: https://www.ncsl.org/research/fiscal-policy/sales-tax.aspx
- Individual state department of revenue websites for registration and filing instructions.
Professional note
In my practice advising remote-first and e-commerce clients, the most common early miss is not tracking transaction counts by state — thresholds often include a transactions test. Regular reconciliation and early registration when thresholds are close can prevent costly audits and penalties.
Disclaimer
This content is educational and does not constitute legal or tax advice. For decisions that affect your business, consult a qualified tax advisor or state tax official to confirm current nexus rules and registration requirements.
