You've probably heard the word "nexus" thrown around in sales tax conversations. It sounds like legal jargon — and technically it is — but the concept is actually pretty simple once you understand it. And understanding it might save you from a nasty surprise down the road.

Here's what nexus means, why it changed dramatically in 2018, and what it means for your ecommerce business today.

What Is Sales Tax Nexus?

Nexus is the legal term for a sufficient connection between your business and a state that requires you to collect and remit sales tax in that state.

Think of it this way: if you have nexus in a state, that state considers you to be "doing business" there and expects you to act as a tax collector on their behalf.

Before 2018, nexus was mostly about physical presence. You had a store in Texas? You collected Texas sales tax. You had a warehouse in Ohio? Ohio sales tax. You sold to customers in California from your home in Illinois, with no employees, inventory, or offices in California? California couldn't require you to collect.

Then everything changed.

South Dakota v. Wayfair: The Case That Changed Everything

In June 2018, the US Supreme Court ruled 5-4 in South Dakota v. Wayfair that states can require out-of-state sellers to collect sales tax even without physical presence — as long as the seller has a significant economic presence.

South Dakota had passed a law saying that if you made more than $100,000 in sales to South Dakota customers, or completed more than 200 transactions with South Dakota customers, you had nexus. Wayfair (and Overstock, and Newegg) challenged it. The Supreme Court sided with South Dakota.

Within two years, all 45 states that have sales tax passed their own economic nexus laws. The landscape for online sellers fundamentally changed.

The bottom line: You can now owe sales tax in states you've never visited, never had employees in, and never stored inventory in — simply because you sold enough products to customers there.

The Two Types of Nexus You Need to Know

Physical Nexus

Physical nexus is the traditional type. You have it if you have any of the following in a state:

A home office or retail store
A warehouse or fulfillment center
Employees, contractors, or salespeople
Inventory stored in the state (including Amazon FBA — this one surprises a lot of sellers)
Attending trade shows or events in the state (some states count this)

Physical nexus is usually clear-cut. If your stuff is there, you have nexus there.

Economic Nexus

Economic nexus is newer and more nuanced. You have it when you exceed a state's sales threshold — even without any physical presence.

The most common threshold is $100,000 in sales to customers in that state in the current or prior calendar year. Some states use a transaction count too.

Economic Nexus Thresholds by State (2026)

Here's where the thresholds stand for the states with the most ecommerce activity. Note: these can change — always verify current rules with the state or a tax professional.

State	Sales Threshold	Transaction Threshold	Notes
Alabama	$250,000	None
Alaska	Varies by city	Varies	No state tax; some cities/boroughs do
Arizona	$100,000	None
Arkansas	$100,000	200
California	$500,000	None	Higher threshold than most states
Colorado	$100,000	None
Connecticut	$100,000	200	Both must be met
Florida	$100,000	None
Georgia	$100,000	200
Illinois	$100,000	200
Indiana	$100,000	200
Kansas	$100,000	None
Kentucky	$100,000	200
Louisiana	$100,000	200
Maryland	$100,000	200
Massachusetts	$100,000	None
Michigan	$100,000	200
Minnesota	$100,000	200
Mississippi	$250,000	None
Missouri	$100,000	None
Nebraska	$100,000	200
Nevada	$100,000	200
New Jersey	$100,000	200
New Mexico	$100,000	None
New York	$500,000	100	Both must be met
North Carolina	$100,000	200
North Dakota	$100,000	None
Ohio	$100,000	200
Oklahoma	$100,000	None
Pennsylvania	$100,000	None
Rhode Island	$100,000	200
South Carolina	$100,000	None
South Dakota	$100,000	None	The original
Tennessee	$100,000	None
Texas	$500,000	None	Higher threshold
Utah	$100,000	200
Vermont	$100,000	200
Virginia	$100,000	200
Washington	$100,000	None
West Virginia	$100,000	None
Wisconsin	$100,000	None
Wyoming	$100,000	None

States with no sales tax: Alaska (no state tax, but local taxes exist), Delaware, Montana, New Hampshire, Oregon. If you're selling to customers in these states, you generally don't owe state sales tax.

How to Know If You Have Nexus

Work through this checklist:

Step 1: Your home state. You automatically have physical nexus where your business is based. Start collecting there.

Step 2: Other states with physical presence. Do you have warehouses, employees, or inventory outside your home state? Those states are nexus states too.

Step 3: Check your sales by state. Pull a report from your ecommerce platform showing sales broken down by state. Look for states where you're approaching or have exceeded $100,000 in sales.

Step 4: Consider your transaction count. In states that count both dollars and transactions, you might hit 200 transactions before hitting $100,000 in sales if your average order value is low.

Step 5: Account for all channels. If you sell on Shopify AND Amazon AND Etsy, sales from all channels count toward your nexus thresholds. It's your total sales to customers in that state, not just one channel.

What Happens After You Have Nexus?

Once you establish nexus in a state, here's what you need to do:

1. Register for a Sales Tax Permit

You can't legally collect sales tax in a state without registering first. Most states let you register online through their Department of Revenue website. There's usually no fee, though a few states charge a nominal registration fee.

2. Start Collecting Tax

From your registration date forward, you're required to collect the correct sales tax from customers in that state. This means using a tool that calculates the right rate — which varies by state, county, city, and special district.

3. File and Remit

Each state has its own filing schedule (monthly, quarterly, or annually, depending on your volume) and its own forms. You collect the tax from customers, then send it to the state on that schedule.

4. Keep Records

Keep records of your sales by state, the tax you collected, and your returns. Most states can audit you going back 3–4 years.

Common Nexus Mistakes

Ignoring Amazon FBA. If you use Fulfillment by Amazon, your inventory is stored in warehouses across the country. Each warehouse location potentially creates physical nexus. This is one of the biggest surprises for newer Amazon sellers.

Not counting all sales channels. Sales from Shopify, Amazon, Etsy, eBay, and any other channel all count toward your state thresholds. You can't look at just one platform.

Registering late. If you cross a threshold and don't register for months, some states can assess back taxes, interest, and penalties for the period when you should have been collecting. Don't wait.

Collecting without registering. Some sellers start collecting tax before registering in a state. This is actually illegal — you can't legally collect tax you're not authorized to collect. Register first, then collect.

The Practical Reality for Small Sellers

If you're just starting out and doing under $100K in revenue total, you likely only have nexus in your home state. Focus on that, get compliant there, and don't stress about the rest yet.

As you grow past $100K in total revenue, start tracking sales by state. You probably won't trigger economic nexus in most states immediately — you'd need $100K specifically from customers in that state. But it's worth watching.

Once you're doing consistent six-figure revenue, monitoring nexus should be automatic — not something you check once a year.

Track Your Nexus With Sails

Manually tracking sales thresholds across 45 states is tedious and error-prone. Sails monitors your sales by state automatically and alerts you as you approach nexus thresholds — before you cross them and become non-compliant.

Connect your Shopify, WooCommerce, or BigCommerce store, and Sails handles the tracking in the background. When you're getting close to a threshold in a new state, you'll know with enough lead time to register and get compliant.

Start tracking your nexus free with Sails — it takes about 5 minutes to connect your store, and the free plan covers most small sellers.

Sales tax law changes frequently. This post reflects rules as of early 2026. Always verify current thresholds with the state or a qualified tax professional before making compliance decisions.

What Is Sales Tax Nexus? A Plain-English Guide for Online Sellers