What is economic nexus?

Economic nexus vs. physical nexus

For most of US history, a state could only force a business to collect its sales tax if the business had a physical presence there: a store, an office, a warehouse, inventory, or employees. That standard still exists. If you have physical presence in a state, you generally have nexus there regardless of your sales volume.

Economic nexusis the newer, second path. It looks only at your economic activity: how many dollars of sales you deliver into the state, and in some states, how many separate transactions. Cross the state’s threshold and you have nexus, even if you’ve never set foot there. The two standards operate independently, so either one alone is enough to create an obligation.

Where it came from: South Dakota v. Wayfair (2018)

Before 2018, the Supreme Court’s Quill decision blocked states from taxing remote sellers without physical presence. As ecommerce grew, states argued they were losing billions in uncollected tax. In South Dakota v. Wayfair, Inc. (June 2018), the Supreme Court overruled Quilland upheld South Dakota’s law, which set a threshold of $100,000 in sales or 200 transactions.

That threshold became the template. Within about two years, every state with a statewide sales tax adopted its own economic nexus rule, most copying the $100,000 figure, many initially copying the 200-transaction prong as well. Since then the trend has been toward simplification: a number of states have repealed their transaction prongs and moved to revenue-only rules.

What counts toward a threshold

Gross sales

Most states measure gross sales into the state: typically your total sales delivered there, often including exempt and wholesale sales, not just taxable retail sales and not your profit. A seller with thin margins can cross a threshold long before the tax involved feels material, so watch revenue, not profit.

Transaction counts

Where a transaction prong exists, it counts separate sales delivered into the state, usually 200. This matters most for high-volume, low-price sellers: 200orders at $20 each is only $4,000 of revenue but can trigger nexus on its own in an “or” state. Today 19 of the 47 taxing jurisdictions still have a transaction prong; the rest are revenue-only.

Measurement windows

States measure over different periods: the current calendar year, the previous calendar year, either of the two, or a rolling 12-month window. The same sales figures can cross a threshold in one state and not another simply because of how each state counts. Check each state’s window before concluding you are safe.

The three trigger logics

Every state’s rule combines its thresholds in one of three ways:

• Revenue only. Cross the dollar threshold and you have nexus. Transaction count is irrelevant. This is now the most common design.
• Revenue or transactions. Either prong triggers on its own. This is the original Wayfair design and the one that catches high-volume, low-price sellers.
• Revenue and transactions. Both prongs must be met. This is rare: only Connecticut and New York currently use it.

As of the latest verification, 42 of the 47 taxing jurisdictions use a $100,000 revenue threshold, and 4 states (Delaware, Montana, New Hampshire, Oregon) have no statewide sales tax at all. The full picture, state by state, is in the economic nexus thresholds comparison chart.

The marketplace facilitator wrinkle

If you sell through a marketplace such as Amazon, Etsy, eBay, or Walmart Marketplace, the platform itself is generally required to collect and remit sales tax on your marketplace sales under separate “marketplace facilitator” laws. That is a real simplification, but it does not make nexus irrelevant for you:

• Your direct sales (your own website, invoices, in-person sales shipped into a state) remain your responsibility.
• Some states count your marketplace sales toward your economic nexus threshold even though the marketplace collects the tax on them, so you may still need to register and file returns.
• Marketplace rules vary by state. Confirm how each state treats marketplace sales rather than assuming they are excluded.

This site’s calculator measures economic nexus from your direct sales only.

How to tell if you owe, and what to do next

1. Total your sales by state. Pull gross revenue and order counts per state from your store, invoicing, or bookkeeping for the relevant window.
2. Compare against each state’s rule. The free nexus calculator does this in one pass for all 50 states and DC, or you can scan the comparison chart state by state.
3. Register where you triggered.Apply for a sales tax permit with each state’s revenue department before you start collecting. Collecting without a permit is generally not allowed.
4. Collect and remit. Charge the correct rate on taxable sales into the state and file returns on the schedule the state assigns you, even for periods with zero tax due.
5. Keep monitoring. Thresholds are measured continuously and rules change. Recheck when your volume grows or at least a few times a year.

This is general information, not tax or legal advice. If you may have crossed thresholds in past periods, a sales tax professional can help you weigh registration timing and voluntary disclosure options.