Sales Tax for Online Sellers: State-by-State Guide | Sales Tax Nexus
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Sales Tax for Online Sellers: State-by-State Guide

Sales Tax Nexus Explained - Economic nexus and sales tax registration requirements for online businesses

Updated: November 2025 Read Time: 19 minutes Topic: Sales Tax Compliance

Understanding Sales Tax Nexus

Sales tax nexus is one of the most critical compliance concepts for online sellers, and unfortunately, one of the most misunderstood. Simply put, nexus is a business's connection to a state that creates a legal obligation to collect and remit sales tax. Without understanding nexus, you might be illegally collecting tax you shouldn't be, or worse, failing to collect tax you're legally required to collect—exposing yourself to penalties, back taxes, and interest.

For decades, sales tax law was straightforward: you only had to collect sales tax if you had a physical presence in a state. But everything changed in 2018 with the Supreme Court's landmark South Dakota v. Wayfair decision, which established that states can require online sellers to collect sales tax based on economic activity alone. Today, 46 out of 50 states have economic nexus laws, making this a critical issue for any online seller on Shopify, Amazon, Etsy, or your own website.

Key Insight: You establish nexus with a state by either having a physical presence there OR exceeding that state's sales/transaction threshold. Once nexus is established, you're legally required to register and collect sales tax on applicable sales.

Types of Sales Tax Nexus

Nexus can be triggered in multiple ways. Understanding each type ensures you're fully compliant:

Physical Nexus

Physical nexus occurs when you have a tangible connection to a state: a warehouse, office, retail store, employee, contractor, or agent physically located there. If you live in California but have a fulfillment center in Texas, you have physical nexus in both states and must register and collect sales tax in both.

Economic Nexus

Economic nexus is triggered when your sales or transaction volume in a state exceeds that state's threshold, regardless of physical presence. For example, if you generate $100,000 in sales to California customers (where you have no office or warehouse), California can require you to collect sales tax on those sales. This is the most important nexus type for online sellers.

Click-Through Nexus

Click-through nexus occurs when you use affiliates or influencers in a state who refer customers to your business through links on their website or social media. If an affiliate earns commission on sales they refer to your business, you may have nexus in their state.

Marketplace Facilitator Nexus

When you sell through marketplaces like Amazon, eBay, or Shopify, those platforms often collect and remit sales tax on your behalf under their state's marketplace facilitator laws. However, you still have nexus in states where your marketplace sales exceed thresholds, potentially creating obligations for sales outside the marketplace.

Economic Nexus Thresholds by State

Each state that has economic nexus laws sets its own threshold. The most common is $100,000 in sales or 200 transactions over a 12-month period, but many states have variations. Here's what you need to know:

Threshold TypeNumber of StatesExample StatesDetails
$100k OR 200 transactionsMost statesCA, TX, NY, FL, PA, ILMost common threshold nationwide
$500k sales2-3 statesTexas, California (for marketplace facilitators)Higher threshold for large retailers
$100k AND 200 transactions3-4 statesConnecticut, MichiganMust meet BOTH thresholds to trigger nexus
$50k sales1-2 statesVarious statesLower threshold requiring earlier registration
No threshold / All sales2-3 statesVermont, Kentucky (recent additions)Any level of economic activity triggers nexus

How to Determine Your Nexus States

Step 1: Calculate Your Sales by State

Review your sales records for the past 12 months and calculate total sales into each state. Most accounting software and ecommerce platforms provide this data. Include sales through all channels: your website, Amazon, Etsy, Shopify, and any other sales you make.

Step 2: Count Transactions by State

Some states track transactions (number of separate sales) rather than revenue. Count how many transactions you've had in each state over 12 months. Again, your accounting software or platform should provide this data easily.

Step 3: Compare to State Thresholds

Visit the Sales Tax Institute's Remote Seller Nexus Chart (salestaxinstitute.com) to find each state's specific threshold and any special rules. Compare your sales and transaction counts to these thresholds.

Step 4: Identify Nexus States

Create a list of all states where your sales exceed the threshold OR where you have physical presence (office, warehouse, employees). These are your "nexus states," and you have a legal obligation to collect and remit sales tax.

State-by-State Registration Requirements

Once you've identified nexus states, you must register for a sales tax permit in each one. Registration processes, timelines, and requirements vary significantly by state:

Registration Timeline Requirements

  • Texas, Colorado: Must register within 30 days of establishing nexus
  • New York: Must register before making your first sale
  • Rhode Island: Must register by January 1 of the year after nexus is established
  • Pennsylvania: Must register by April 1 of the year following threshold attainment
  • Minnesota, New Jersey: Must register within 2 months of establishing nexus

Many states allow online registration through their Department of Revenue website, though some still require paper applications. Registration is typically free, though a few states charge a nominal application fee ($0-50).

What You'll Need for Registration

  • Business name, address, and ownership structure (sole proprietor, LLC, etc.)
  • Employer ID Number (EIN) or Social Security Number
  • Description of products/services sold
  • Estimated monthly sales volume
  • Start date of business
  • Banking information (some states)

Calculating and Collecting Sales Tax

Once registered, you must collect applicable sales tax at checkout. Sales tax rates vary dramatically by location—from 0% (New Hampshire, Alaska, Oregon, Montana) to over 10% in some localities.

Key Rules for Collection

Charge the correct rate: Different products are taxed at different rates (clothing sometimes exempt, digital goods varies, groceries often exempt). Research your specific products in each nexus state.

Include shipping if taxable: Some states tax shipping; others don't. Verify this for each nexus state.

Account for local taxes: Some states have county or city taxes on top of state rates. Your ecommerce platform should handle this automatically if configured correctly.

Track exemptions: Certain customers (resellers with exemption certificates, nonprofits) may be exempt from sales tax. Require documentation and record it.

Filing and Remitting Sales Tax

After collecting sales tax, you must file returns and remit collected funds to each nexus state. Filing frequency depends on your sales volume:

  • Low-volume sellers: Typically annual filing
  • Medium-volume sellers: Quarterly filing
  • High-volume sellers: Monthly filing (sometimes weekly)

Each state specifies your filing frequency based on estimated sales. Most states allow online filing through their Department of Revenue portal. Use accounting software with sales tax automation to ensure accuracy and meet deadlines.

Marketplace Facilitator Laws

If you sell through Amazon, eBay, Etsy, or Shopify, these platforms often act as "marketplace facilitators," meaning they collect and remit sales tax on your behalf under state law. However, important caveats apply:

  • Marketplace handles tax collection: The platform automatically collects sales tax from customers
  • Marketplace remits tax to states: The platform reports your sales and remits collected tax
  • You're still liable for outside-marketplace sales: If you make sales on your own website, through email, or via other channels, YOU must handle tax collection for those sales
  • Marketplace sales count toward nexus: Even though the marketplace collects tax, your marketplace sales volume counts toward triggering nexus in additional states for your non-marketplace sales

Common Sales Tax Nexus Mistakes

Ignoring low-threshold states: Every state's threshold matters. Missing a single state creates ongoing compliance violations.

Only tracking website sales: Don't forget Amazon, eBay, Etsy sales—they count toward nexus even if the marketplace collects tax.

Assuming marketplace handling means no obligations: Marketplace facilitators handle marketplace sales but not your website sales, channel sales, or affiliate sales.

Registering too late: Delaying registration creates back-tax liability. Register as soon as you establish nexus.

Setting incorrect tax rates: Failing to account for local taxes or exempt products leads to under-collection and compliance issues.

Managing Sales Tax Compliance

For sellers managing multiple nexus states, use sales tax software like TaxJar, Avalara, or Zappi. These tools:

  • Automatically calculate correct tax rates by location
  • Track sales by state and identify when thresholds are reached
  • Generate filing forms and automate remittance
  • Maintain compliance across all nexus states

Monthly costs range from $20-200 depending on sales volume, but the compliance assurance is invaluable for growing businesses.

Sales Tax Nexus Facts

46

US states with economic nexus laws (of 50)

$100k

Most common annual sales threshold for nexus

200

Transaction threshold in most states per year

30-180

Days to register after establishing nexus (varies by state)

Monthly-Annual

Filing frequency depends on sales volume and state

4

States with NO sales tax (AK, DE, MT, NH, OR)

Frequently Asked Questions About Sales Tax Nexus

When do I need to collect sales tax?

You must collect sales tax when you have nexus (connection) to a state. This occurs when you have physical presence there OR when your sales exceed that state's economic nexus threshold (typically $100k or 200 transactions annually). Check each state's requirements and register as soon as you establish nexus.

Do Amazon marketplace sales count toward my nexus?

Yes, absolutely. Amazon Marketplace sales volume counts toward establishing nexus even though Amazon collects and remits tax on those sales. If you generate $100,000 in total sales (Amazon + other channels), you have nexus in California regardless of which channel the sales came from. This means you may owe sales tax collection obligations on your non-Amazon sales.

Which states have no sales tax?

Five states have no sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. However, four of these (all except Oregon) allow local jurisdictions to charge sales tax. Even in these states, you may have specific sales tax obligations, so verify state-by-state requirements. This doesn't mean zero tax compliance in these states.

Do I need to register in every state where I ship products?

No. You only need to register in states where you have nexus—either physical presence or economic activity exceeding state thresholds. You could ship to all 50 states but only have nexus (and thus tax collection obligations) in 5-10 states, depending on your sales volume in each. Focus on where you actually have legal obligations based on your sales data.

What happens if I don't register when I reach nexus?

Failing to register creates serious penalties: back taxes (sometimes dating to when nexus was established), penalties (often 5-25%), and interest (compounded monthly). States increasingly audit ecommerce sellers and cross-reference marketplace data, catching unregistered sellers. Register immediately upon establishing nexus—it's much less costly than dealing with back taxes and penalties later.

Do I need to charge sales tax on digital products?

It depends on the state. Some states tax digital products (ebooks, software, digital downloads); others don't. California taxes digital products; several states exempt them. This is where sales tax software becomes invaluable—it handles these complex state-specific rules automatically. If you sell digital products, invest in proper tax software to ensure compliance.

How often must I file sales tax returns?

Filing frequency varies by state and depends on your sales volume. Most states require annual filing for low-volume sellers, quarterly for medium volume, and monthly for high volume. Each state specifies your frequency based on estimated sales. Check your state registration documents or contact your Department of Revenue to confirm. Use accounting software with filing reminders to meet all deadlines.

Should I use sales tax software or handle it manually?

If you have nexus in multiple states (especially 5+), sales tax software is worth the investment. Manual calculations are error-prone and extremely time-consuming. Software like TaxJar or Avalara automates tax calculations, filing reminders, and generates necessary forms. For single-state sellers with simple product offerings, manual tracking may suffice, but most growing businesses benefit significantly from automation.