Quick summary
This article explains practical tests states use in 2025 to establish sales tax nexus for remote sellers, how to evaluate where you have obligations, and pragmatic steps to register, collect, and remediate. It draws on federal and state developments since South Dakota v. Wayfair (2018) and current multi-state guidance from organizations such as the National Conference of State Legislatures (NCSL) and the Streamlined Sales Tax Governing Board.
(Authority: U.S. Supreme Court — South Dakota v. Wayfair, Inc., 2018; NCSL; Streamlined Sales Tax Governing Board.)
Why this matters now
Since the 2018 Wayfair decision, states have actively revised nexus rules to capture remote sales. By 2025, nearly every state with a sales tax has an economic nexus standard or marketplace facilitator law in place. If you sell across state lines, missing a nexus trigger can lead to back taxes, interest, and penalties. In my practice advising online merchants, the issues I see most often are: undercounting taxable sales into a state, misunderstanding marketplace facilitator reporting, and failing to track inventory placed with third-party logistics (3PL) or marketplaces (e.g., Fulfillment by Amazon).
Key tests states use in 2025 to establish nexus
Below are the practical, commonly applied tests you should evaluate for each state where you have customers, inventory, or business relationships.
- Physical presence
- Classic triggers: an office, retail location, employees, or independent contractors performing services in the state. This also includes trade shows and temporary physical activity if it’s more than incidental. (See state DOR guidance.)
- Economic nexus
- Most states now have an economic nexus test based on sales revenue, transaction count, or both. A common model used by many states is $100,000 in sales or 200 transactions in a 12-month period, but thresholds vary by state. Do not assume a single federal standard exists — check each state. (Source: NCSL state-by-state nexus guide.)
- Marketplace facilitator rules
- Many states require marketplace facilitators (Amazon, Etsy, eBay, etc.) to collect and remit sales tax on behalf of sellers. In such cases, the marketplace often handles the collection, but sellers must still monitor whether they have independent nexus for other tax types. (Source: Streamlined Sales Tax Governing Board.)
- Inventory and 3PL/fulfillment presence
- Storing inventory in a state (including with a 3PL or fulfilling via a marketplace’s warehouse) typically creates nexus because the inventory provides a physical presence. This is one of the most common surprise nexus triggers for remote sellers.
- Affiliate, referral, or click-through nexus
- Some states create nexus where in-state affiliates or referral partners generate sales, or when a seller pays for in-state advertising links. States differ on how they apply affiliate or click-through rules.
- Agent and consignment activity
- Using in-state agents, representatives, or consignment arrangements who facilitate or satisfy sales can create nexus.
- Temporary activities and events
- Participation in trade shows, pop-up shops, and other short-term events can create nexus depending on length and nature of activity.
Practical evaluation steps (an operational checklist)
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Map where you have customers, inventory, contractors, employees, or affiliates. Create a master spreadsheet that tracks: state, activity type (inventory, employee, marketplace), taxable sales to state, transaction count (12-month rolling), and marketplace facilitator status.
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Apply each state’s tests. Use the state DOR website and the NCSL tracker to confirm thresholds and filing rules. (NCSL provides a helpful state-by-state summary.)
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Review marketplace invoices and 1099-Ks. Compare marketplace-collected tax to your own sales to ensure no double collection or missed remittance.
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Confirm where inventory is stored. Request inventory location reports from 3PLs and marketplaces monthly.
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Set automated alerts when rolling 12-month sales approach common thresholds (e.g., $100k or the state-specific amount).
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If you hit a trigger, register for a sales tax permit before collecting. Early registration often reduces exposure and simplifies compliance.
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Consider voluntary disclosure agreements (VDAs) if you discover past noncompliance; many states offer reduced lookbacks and penalty relief under VDAs.
Examples and scenarios (real-world framing)
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Scenario A: You sell $120,000 in tangible goods to customers in State X over a 12-month period. State X has an economic nexus threshold of $100,000 in sales. You must register, collect, and remit sales tax in State X starting the period specified by State X’s rule (some states have lookback or safe-harbor rules). (Check the specific state DOR guidance.)
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Scenario B: You are an Etsy seller and the marketplace collects sales tax for orders shipped from the marketplace. Marketplace facilitator rules reduce your collection burden, but if you also store inventory in another state or have employees there, separate nexus could still apply.
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Scenario C: You use Fulfillment by Amazon (FBA) and Amazon routes inventory to a warehouse in State Y. That storage typically gives you nexus in State Y even if you never set foot there. This is a frequent issue I counsel clients on — tracking inventory locations monthly avoids surprises.
Common mistakes and how to avoid them
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Mistake: Assuming only physical storefronts can create nexus. Reality: Economic nexus and inventory/storage presence are equally important.
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Mistake: Relying on marketplace facilitator rules without verifying which transactions are covered. Action: Reconcile marketplace reports with your own order records.
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Mistake: Not using a rolling 12-month window for economic thresholds. Action: Automate the rolling calculation and set alerts.
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Mistake: Ignoring state-specific exemptions and sourcing rules. Action: Verify taxability and point-of-sale rules for the product or service you sell.
Registration, filing, and remediation practicalities
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Register promptly: Once a nexus event is identified, register for a sales tax permit in that state. Many states require registration within a set time; delays can increase exposure.
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Filing frequency and returns: States set filing frequencies based on volume (monthly, quarterly, annual). Confirm the frequency when you register.
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Remediation options: If you find past noncompliance, explore a Voluntary Disclosure Agreement (VDA) or similar program. VDAs often limit the number of prior years open for assessment and reduce penalties.
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Keep documentation: Maintain detailed records of inventory reports, sales ledgers, contracts with affiliates, and marketplace settlement reports for at least the period required by each state (commonly 3–7 years).
Tools and automation
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Use a sales tax automation provider or integrated tax engine that supports multi-state nexus detection, taxability rules, and returns filing. These tools reduce manual errors and maintain nexus logs.
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If you use enterprise resource planning (ERP) or e-commerce platforms, enable automated tax calculation and capture shipping/destination data to support sourcing decisions.
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Consider professional support for state registrations and VDAs; a tax professional can often negotiate better terms for lookbacks and penalties.
(Helpful internal reads: see our guides on How State Sales Tax Nexus Rules Affect Remote and Online Businesses and State Sales Tax Nexus for Remote Sellers: Practical Steps to Register and Comply. For fulfillment-specific rules, read How State Nexus Rules Apply to Dropshipping and Fulfillment-by-Third-Party Models.)
Where to confirm rules and authoritative sources
- State Department of Revenue (DOR) websites — primary source for registration, thresholds, and filing requirements.
- National Conference of State Legislatures (NCSL) — state-by-state summaries and maps (NCSL).
- Streamlined Sales Tax Governing Board — guidance on simplified and uniform tax rules and marketplace facilitator treatment (Streamlined Sales Tax).
- U.S. Supreme Court — South Dakota v. Wayfair, Inc. (2018) for the legal foundation.
Professional perspective and closing advice
In my practice, the simplest way to avoid unexpected exposure is to (1) track inventory locations closely, (2) automate a rolling 12-month sales calculation to each state, (3) reconcile marketplace reports monthly, and (4) register early when a reasonable probability of nexus exists. Compliance rarely becomes easier the longer you wait.
This overview is educational and does not constitute legal or tax advice. For tailored guidance about your business, consult a qualified state and local tax (SALT) professional or attorney.
Sources and further reading: U.S. Supreme Court (South Dakota v. Wayfair, Inc., 2018); National Conference of State Legislatures (state nexus trackers); Streamlined Sales Tax Governing Board.
