What are the economic nexus thresholds by state?
Economic nexus means you owe sales tax in a state based on your sales activity there, even without any physical presence. After the 2018 Supreme Court ruling in South Dakota v. Wayfair, states gained the power to require remote sellers to collect and remit sales tax once they cross certain thresholds.
The dominant threshold is $100,000 in gross sales or 200 transactions in a calendar year. The majority of states adopted this standard or something close to it. Cross either number and you’ve established nexus in that state. This includes Alabama, Arizona, California, Colorado, Georgia, Illinois, Indiana, Massachusetts, Michigan, New York, North Carolina, Ohio, Pennsylvania, Texas, Washington, and roughly 25 others.
Several states have eliminated the transaction count and look only at dollar amounts. Florida, Mississippi, and Tennessee now focus purely on sales volume. This matters if you sell high-value items with fewer transactions versus lower-priced goods with high volume.
A handful of states set lower thresholds. Kansas requires registration at just $10,000 in sales. If you sell nationwide, you likely hit Kansas nexus quickly even if your volume there feels insignificant.
Five states have no statewide sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. However, Alaska allows local jurisdictions to impose their own sales taxes, which can still create obligations for sellers shipping there.
Thresholds are measured by destination, not origin. E-commerce sellers shipping from Massachusetts to Texas count those sales toward their Texas threshold, not their Massachusetts one. Track sales by where your customers are located.
Once you cross a threshold, you generally need to register for a sales tax permit before your next transaction or by a state-specified deadline. Then you collect tax on applicable sales and file returns according to that state’s schedule. Missing the registration deadline exposes you to back taxes, interest, and penalties on sales you should have been collecting.
States adjust thresholds periodically, and a few have changed rules multiple times since 2018. Verify current requirements before relying on any specific number, especially if you’re approaching thresholds in multiple states.
If you’re selling across state lines and growing, sales tax compliance becomes complicated fast. A business hitting $100,000 in one state is usually generating enough revenue nationally to trigger obligations in several states at once. Working with a Merrimack Valley bookkeeper who understands multi-state sales tax can prevent expensive surprises when you realize you should have been collecting in eight states for the past two years.
The Merrimack Valley's Trusted Accounting Partner
The Next Step:
A 15-Minute Call
Tell us about your business and what you're dealing with. We'll listen, ask a few questions, and give you a straightforward quote.
More Questions
How do I track burn rate and runway for my startup?
Calculate burn rate from your monthly cash outflows and divide remaining cash by that number for runway. Accurate tracking requires clean monthly books and a clear view of your bank balances.
Read answerWhat financial reports should a healthcare practice review?
Healthcare practices should review standard financial statements plus industry-specific reports like accounts receivable aging by payer, collections rate, and revenue by service type. The AR aging report matters most because insurance reimbursement drives cash flow.
Read answerHow do I file sales tax returns for multiple states?
Register separately with each state where you have nexus, track the different filing frequencies and due dates, and either file manually through each state's portal or use software to automate the process.
Read answerHow do I handle payroll for employees in multiple states?
You need to register with each state where employees work, withhold taxes according to that state's rules, and pay state unemployment insurance separately for each jurisdiction. The complexity comes from every state having different rates, forms, and deadlines.
Read answerWhat financial reports do investors want to see from startups?
Investors expect to see your income statement, balance sheet, and cash flow statement along with burn rate and runway calculations. They also want key metrics specific to your business model and projections showing how you'll use their capital.
Read answerHow do I get a sales tax exemption certificate from customers?
Request the certificate before or at the time of the first tax-exempt sale, not after. Store certificates organized by customer and state so you can produce them if audited. Without proper documentation on file, you're liable for the tax even if the customer was legitimately exempt.
Read answer
