Economic Nexus by State:
When Does Your Business Owe Sales Tax?

What Is Economic Nexus and Where Did It Come From?

Before 2018, states could only require out-of-state sellers to collect sales tax if those sellers had a physical presence in the state — a store, warehouse, employee, or office. Online sellers with no physical footprint in a state generally didn't have to collect that state's sales tax.

That changed with South Dakota v. Wayfair, Inc., decided by the U.S. Supreme Court on June 21, 2018. The Court ruled that physical presence is not required — states can establish sales tax obligations based purely on economic activity within the state.

The principle: if you're making significant sales into a state, you're benefiting from that state's infrastructure, legal system, and customer base. Requiring you to collect and remit sales tax is a reasonable condition of doing business there.

How Economic Nexus Is Triggered

Every state sets its own rules. Generally, once you exceed a state's threshold during the measurement period, you're required to:

• Register with the state's tax authority
• Collect sales tax from customers in that state
• Remit collected taxes on the state's filing schedule
• File periodic sales tax returns

The registration deadline and collection start date vary by state — some require action on your next transaction, others give you 30–90 days, and some apply the obligation at the start of the next calendar year.

The Threshold Landscape: What You're Working With

Most states converged quickly on $100,000 in sales as the standard threshold following Wayfair, mirroring the benchmark in South Dakota's original law. But several notable outliers remain, and the definition of "sales" varies significantly.

Dollar Threshold Overview

Transaction Thresholds: A Dying Breed

Many states originally added a transaction count test (commonly 200 transactions) alongside the dollar threshold. Most used an OR structure — exceeding either the dollar amount or the transaction count would trigger nexus.

Over time, the majority of states have removed their transaction thresholds, leaving only the dollar amount. A few states still have them — and Connecticut and New York use an AND structure (you must exceed both tests).

State-by-State Economic Nexus Reference Table

The following table summarizes economic nexus rules for all 50 states, Washington DC, and Puerto Rico. Data is from the Sales Tax Institute as of May 4, 2026. Rules change frequently — verify with each state or a tax professional before relying on this for compliance.

Source: Sales Tax Institute — Economic Nexus State Guide, as of May 4, 2026. Highlighted in red: thresholds above the $100K standard, or AND transaction requirements. Shaded rows: no sales tax states.

Notable State Rules to Know

While most states follow a similar $100K-or-threshold-exceeded framework, a handful of states have rules that don't match the standard pattern. These are worth understanding in detail.

Connecticut: The "AND" State

Connecticut is the primary state using a dual AND requirement. You must exceed both $100,000 in retail sales and 200 or more separate transactions during the 12-month period ending September 30 to trigger nexus. Meeting only one condition doesn't create nexus. Because of the September 30 measurement date, registration kicks in October 1 — not immediately.

New York: High Bar, AND Structure

New York requires $500,000 in gross receipts from sales of tangible personal property AND more than 100 transactions during the immediately preceding four sales tax quarters. Both thresholds must be met simultaneously. Once triggered, you have 30 days to register and 20 additional days before collection must begin. New York also has additional state-level S corp franchise taxes, making it one of the more complex compliance states.

California: $500K Threshold, Immediate Trigger

California's $500,000 threshold is gross sales of tangible personal property only (services and digital goods have different rules under California's complex tax code). Unlike most states, once you exceed California's threshold, the obligation begins the day you exceed it — not on the first of the following month or year. Marketplace sales count toward your threshold as an individual seller.

Texas: $500K Gross Revenue, 4-Month Lag

Texas uses gross revenue (including nontaxable and exempt sales) as its measure, with a generous $500,000 threshold. The registration deadline is the first day of the fourth month after the month you exceeded the threshold — one of the longer grace periods in the country. Marketplace sales count toward your threshold.

Alabama: $250K + Specified Activities

Alabama's threshold requires $250,000 in retail sales plus "specified activities" — broadly defined to include maintaining a website accessible from Alabama, advertising in Alabama, or other forms of economic engagement. Individual sellers don't count marketplace sales toward their threshold.

Pennsylvania: Two-Tier System

Pennsylvania has a dual structure. At $10,000 in taxable sales (prior 12-month period), you must either collect tax or comply with notice and reporting requirements. At $100,000 in gross sales (prior calendar year), mandatory registration and collection applies. Most small sellers will hit the mandatory threshold long before needing to navigate the notice-and-report option.

States With No Sales Tax

Four states have no general state-level sales tax. Economic nexus rules do not apply in these states because there is no sales tax to collect or remit.

Marketplace Sellers: Does Amazon or Etsy Handle This for You?

Most major marketplace platforms — Amazon, Etsy, eBay, Walmart Marketplace, Shopify (in certain configurations) — are classified as marketplace facilitators and are required to collect and remit sales tax on your behalf in most states. If you sell exclusively through a qualifying marketplace, your personal registration obligation may be reduced or eliminated in many states.

What to Do If You Think You Have Economic Nexus

Discovering potential unregistered nexus can feel overwhelming — but the worst outcome is doing nothing. Here are the general steps most sellers follow, though the right path depends heavily on your specific situation. Work with a qualified sales tax professional.

1. Audit your sales by state — Pull your sales data for the prior 12 months, broken down by ship-to state. Most e-commerce platforms and accounting software can generate this report. Compare your totals against each state's threshold using the table above.
2. Identify where you may have crossed the line — Note which states you may have exceeded (or come close to) the threshold. Pay attention to whether the state uses gross, retail, or taxable sales as the measure.
3. Consult a sales tax professional — Before registering anywhere, talk to a CPA, enrolled agent, or sales tax specialist. They can assess your actual exposure, evaluate whether any relief programs apply to past periods, and help you register correctly.
4. Register in affected states — Registration is done through each state's revenue department, or through the Streamlined Sales Tax (SST) registration system if the state participates. Most registrations are done online.
5. Begin collecting immediately upon registration — Once registered, you're obligated to collect on new sales. Most sales tax software (TaxJar, Avalara, Vertex) integrates directly with e-commerce platforms to automate collection.
6. Set up a filing schedule — States require periodic returns (monthly, quarterly, or annually, depending on your volume). Missing filings generates penalties even if you owe no tax. Automate where possible.