Before 2018, small online businesses could largely ignore sales tax in states where they had no physical presence. The Supreme Court's South Dakota v. Wayfair decision changed that permanently. Economic nexus rules now require most online sellers to collect sales tax in states where they exceed certain revenue or transaction thresholds—even without a single employee or square foot there.
What Is Economic Nexus
Economic nexus means that if you sell above a threshold into a state—typically $100,000 in sales or 200 transactions—you are required to collect and remit that state's sales tax, regardless of where your business is physically located. Forty-seven states now have economic nexus laws.
Finding Your Thresholds
Every state sets its own economic nexus thresholds. Most follow the $100,000 / 200 transaction standard, but some states are lower. Your first step is to identify which states you are currently selling into and what your revenue in each state looks like. Most eCommerce platforms (Shopify, WooCommerce, Amazon) can generate this report.
Key Takeaways
- Economic nexus applies in 47 states—if you sell online, you almost certainly have nexus obligations outside your home state.
- The standard threshold is $100K in sales or 200 transactions per state per year—but some states are lower.
- Automated sales tax software (TaxJar, Avalara) pays for itself quickly by eliminating manual compliance risk.
