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Sales Tax Nexus Guide 2026: Economic Nexus Thresholds for Every State

February 7, 2026

14 min read

What Is Sales Tax Nexus and Why Does It Matter?

"Nexus" is the legal term for a sufficient connection between your business and a state that gives that state the right to require you to collect and remit sales tax. If you have nexus in a state, you must collect sales tax on taxable sales to customers in that state.

Before 2018, nexus was mostly about physical presence — you needed an office, warehouse, or employee in a state. Then came the landmark South Dakota v. Wayfair, Inc. Supreme Court decision (June 21, 2018), which changed everything.

The Wayfair Decision

The Supreme Court ruled that states can require businesses to collect sales tax based on economic activity alone — no physical presence required. If you sell enough into a state, you have nexus. Period.

Within two years of the decision, every state with a sales tax adopted economic nexus laws. If you sell products or services online, ship goods to multiple states, or have an e-commerce business, this directly affects you.

Two Types of Nexus

Physical Nexus

Physical nexus exists when you have a tangible presence in a state:

Office, store, warehouse, or any physical location
Employees working in the state (including remote workers)
Inventory stored in the state (including Amazon FBA warehouses)
Contractors or representatives operating in the state
Attending trade shows (some states: temporary presence triggers nexus)
Owning tangible property in the state

Economic Nexus

Economic nexus is triggered by reaching a sales threshold in a state, regardless of physical presence. Most states use one or both of these thresholds:

Revenue threshold: Typically $100,000 in sales to customers in the state
Transaction threshold: Typically 200 separate transactions with customers in the state

If you exceed either threshold (in states that have both), you have nexus.

Economic Nexus Thresholds by State (2026)

Here is every state's current economic nexus threshold:

|---|---|---|---|

| Alabama | $250,000 | N/A | Simplified Sellers Use Tax Program (SSUT) |

| Arizona | $100,000 | N/A | Revenue only; no transaction threshold |

| California | $500,000 | N/A | Highest threshold in the nation; revenue only |

| Colorado | $100,000 | N/A | Revenue only |

| Florida | $100,000 | N/A | Revenue only; effective July 2021 |

| Idaho | $100,000 | N/A | Revenue only |

| Iowa | $100,000 | N/A | Revenue only |

| Kansas | $100,000 | N/A | Revenue only |

| Massachusetts | $100,000 | N/A | Revenue only |

| Mississippi | $250,000 | N/A | Revenue only |

| Missouri | $100,000 | N/A | Revenue only; effective January 2023 |

| New Mexico | $100,000 | N/A | Revenue only |

| North Dakota | $100,000 | N/A | Revenue only |

| Oklahoma | $100,000 | N/A | Revenue only |

| Pennsylvania | $100,000 | N/A | Revenue only |

| South Carolina | $100,000 | N/A | Revenue only |

| South Dakota | $100,000 | N/A | Revenue only (removed transaction threshold) |

| Tennessee | $100,000 | N/A | Revenue only |

| Texas | $500,000 | N/A | Revenue only; one of the highest thresholds |

| Washington | $100,000 | N/A | Revenue only |

| Wisconsin | $100,000 | N/A | Revenue only |

States with NO sales tax: Alaska (no state tax, but local taxes exist), Delaware, Montana, New Hampshire, Oregon.

Key outliers:

California, Texas, New York: $500,000 threshold — significantly higher than other states
Connecticut, New York: Must meet BOTH thresholds, not either
Alabama, Mississippi: $250,000 threshold

Marketplace Facilitator Laws

If you sell through a marketplace like Amazon, eBay, Etsy, or Walmart Marketplace, you may not need to collect sales tax yourself. Every state with sales tax has adopted marketplace facilitator laws requiring the marketplace to collect and remit sales tax on behalf of sellers.

What This Means for You

Selling through Amazon, eBay, Etsy, Walmart, etc.: The marketplace handles sales tax collection and remittance. You generally don't need to register in those states for marketplace sales.
Selling on your own website: You're responsible for determining nexus and collecting sales tax.
Selling both ways: You must track marketplace vs. direct sales separately. Your direct sales may trigger nexus even if marketplace sales don't count.

Important: Do Marketplace Sales Count Toward Economic Nexus?

It depends on the state. Most states count only direct sales (not marketplace sales) toward the economic nexus threshold. But some states count ALL sales, including those through marketplaces. Check each state's specific rules.

Measuring Your Nexus: What Sales Count?

Revenue Threshold — What Counts?

Taxable AND exempt sales usually count toward the threshold
Sales of services count in most states (even if the service itself isn't taxable)
Wholesale/resale sales are generally excluded
Measurement period: Typically current or prior calendar year. If you exceeded the threshold in either, you have nexus.

Common Mistakes

Only counting taxable sales. Most states count total sales (taxable + exempt) toward the threshold.
Forgetting about prior year. If you exceeded the threshold last year, you likely still have nexus this year even if current-year sales are lower.
Not counting SaaS or digital products. States increasingly tax digital goods and SaaS — and even if they don't, the revenue may count toward your threshold.

Amazon FBA and Inventory Nexus

If you use Amazon FBA (Fulfillment by Amazon), Amazon stores your inventory in warehouses across multiple states. Having inventory in a state creates physical nexus in that state, regardless of whether you meet the economic nexus threshold.

Amazon distributes inventory to optimize shipping times, which means your products could be in 20+ states without your knowledge. You can check where Amazon stores your inventory via Amazon Seller Central (Inventory > Inventory Planning > FBA Inventory).

States that have explicitly addressed inventory nexus: California, Texas, New York, Pennsylvania, Georgia, Florida, and many others.

What to Do When You Have Multi-State Nexus

Step 1: Determine Where You Have Nexus

Review your sales data for the past 12 months. For each state, check:

Do you have physical presence? (office, employee, inventory)
Did you exceed the economic nexus threshold (revenue or transactions)?

Step 2: Register for Sales Tax Permits

Do NOT collect sales tax without a valid permit. Register with each state's tax authority before you start collecting.

Most states allow online registration through their department of revenue website. Processing time: 1-4 weeks.

Step 3: Configure Your Sales Tax Collection

You need to collect the correct rate for each customer's location. Rates vary not just by state, but by county, city, and special district.

Manual collection is nearly impossible at scale. Use an automated solution:

| Tool | Cost | Best For |

|---|---|---|

| TaxJar | $99-$499/month | E-commerce businesses |

| Avalara | Custom pricing | High-volume / complex scenarios |

| Stripe Tax | 0.5% per transaction | Stripe users (simple setup) |

| Shopify Tax | Built into Plus plans | Shopify merchants |

| QuickBooks Sales Tax | Included in subscriptions | QB users |

Step 4: File Sales Tax Returns

Each state has its own filing frequency (monthly, quarterly, or annual) and its own form. States may assign you a frequency based on your tax liability.

Step 5: Maintain Records

Keep detailed records of:

Sales by state, county, and city
Tax collected by jurisdiction
Exemption certificates from wholesale/resale customers
Filing confirmations

Special Situations

SaaS and Digital Products

The taxability of SaaS (Software as a Service) varies wildly by state:

States that tax SaaS: Texas, New York, Pennsylvania, Connecticut, Ohio, and others (approximately 20+ states)
States that don't tax SaaS: California, Colorado, Florida, and others
It's complicated: Many states have specific criteria or exemptions

If you sell SaaS, you need a state-by-state taxability analysis.

Services

Most states don't tax professional services (consulting, legal, accounting). But some states tax certain services:

Hawaii: Taxes virtually all services
New Mexico: Taxes most services
South Dakota: Taxes most services
West Virginia: Taxes many services

Subscriptions and Recurring Revenue

Recurring charges (monthly subscriptions, SaaS fees) are typically sourced to the customer's location. Each month's charge is a separate transaction for nexus counting purposes.

Penalties for Not Collecting Sales Tax

If you have nexus and fail to collect sales tax:

You owe the uncollected tax out of your own pocket (you can't retroactively charge customers)
Penalties: Typically 5-25% of unpaid tax
Interest: Accrues from the original due date
Audit risk: States are getting better at identifying non-compliant businesses through marketplace data, payment processor data, and information sharing

Voluntary Disclosure Agreements (VDAs)

If you discover you should have been collecting sales tax in a state but weren't, consider a Voluntary Disclosure Agreement. Most states offer VDA programs that:

Limit lookback period (usually 3-4 years instead of open-ended)
Waive or reduce penalties
Maintain confidentiality

Apply through the Multistate Tax Commission's National Nexus Program for VDAs in multiple states simultaneously.

Track Your Sales Tax Nexus with SMBRegs

Multi-state sales tax compliance is complex, but it's manageable with the right tools. [Take our free compliance assessment](/wizard) and we'll identify where you likely have nexus, what thresholds to monitor, and what registrations you need.

[Get your sales tax nexus analysis →](/wizard)