The short version
✔ Selling into a state can create a sales tax obligation even if you have no office, employee, or warehouse there. This is called economic nexus, and it has applied nationwide since the 2018 Wayfair decision.
✔ Most states set the trigger at $100,000 in sales into the state per year. A few sit higher, including California, Texas, and New York at $500,000.
✔ The old "200 separate transactions" trigger is going away. Around 16 states have dropped it, which helps high-volume, low-price sellers.
✔ Selling through Amazon, Etsy, or another marketplace does not always cover you. Those sales can still count toward your threshold.
✔ If you have already crossed a line, you have options, including voluntary disclosure programs that can limit how far back the exposure reaches.
Yes, you may have to collect sales tax in a state where your business has no physical presence at all. Since the Supreme Court decided South Dakota v. Wayfair in 2018, states can require out-of-state sellers to collect and remit sales tax once their sales into that state pass a set threshold. That threshold is most often $100,000 in sales per year, measured one state at a time. If you ship products or sell taxable services across state lines, this rule probably touches your business.
Multi-state sales tax is one of the most common places we see growing businesses quietly fall out of compliance. At LUCA, we help small businesses find where they have crossed a sales tax line, register in the states that matter, and build a simple process so tracking it never turns into a scramble at year end. If you are still setting up your books, our guide on how to set up accounting for a new business is a good place to start, because clean records are what make nexus tracking possible in the first place.
Nexus is the connection between your business and a state that is strong enough to create a tax obligation. For decades, that connection had to be physical. You needed an office, employees, or inventory in a state before it could ask you to collect sales tax. That changed with South Dakota v. Wayfair in 2018, when the Supreme Court ruled that a large enough volume of sales into a state can create nexus on its own, with no physical footprint required. This is what people mean by economic nexus.
Today, all 45 states that charge sales tax, plus Washington, D.C., enforce some version of an economic nexus rule. The four states with no statewide sales tax, New Hampshire, Oregon, Montana, and Delaware, are the exceptions.
Physical presence still counts too. If you store inventory in a state, including in a third-party fulfillment warehouse, send employees there, or travel to make sales, you can create physical nexus even before you reach an economic threshold.
Each state sets its own threshold, and you measure it state by state, not as a national total. The most common trigger is $100,000 in sales into the state during the current or prior year. Some of the largest states set the bar higher. California, Texas, and New York use $500,000, while Alabama and Mississippi use $250,000.
A few details tend to surprise business owners:
✔ Thresholds are per state. You could be well under the line in forty states and over it in one.
✔ The measurement window is usually the current or previous year, so a strong season can pull you in.
✔ Many states count all your sales into the state toward the threshold, including exempt and wholesale sales, even when the tax you eventually collect is lower.
Once you cross a threshold, most states expect you to register and begin collecting quickly, sometimes by the next month. That is why watching the number ahead of time matters more than reacting after the fact, and why it is worth building the cost of compliance into your annual budget before it becomes urgent.
For years, the standard threshold was "$100,000 in sales or 200 separate transactions," and either one could trigger nexus. That second test caused real problems for businesses selling a high number of low-price items, because 200 orders can add up to far less than $100,000 in revenue.
States have been listening. Around 16 states have now removed the 200-transaction test and moved to a sales-only standard. Illinois dropped it at the start of 2026, and Kentucky is set to remove it on August 1, 2026. Roughly 18 states still count transactions, so it has not disappeared everywhere, but the clear trend is toward measuring dollars rather than order count.
Melanie Shores, CPA, at LUCA puts it plainly: "The transaction-count rule caught a lot of small sellers who never imagined they owed tax in a state. As more states drop it, the risk shifts back toward businesses with real revenue in a place, which is a fairer spot for it to sit. But it also means you cannot lean on a rule of thumb you learned three years ago. The map keeps changing."
Partly, and this is where a lot of confusion lives. Most states now have marketplace facilitator laws, which require large platforms like Amazon, Etsy, and Walmart to collect and remit sales tax on the orders placed through them. For sales that run entirely through the marketplace, the platform generally handles the tax.
The catch is twofold. First, in many states those marketplace sales still count toward your own economic nexus threshold, even though the platform is collecting the tax. Second, if you also sell through your own website or other channels, those direct sales are your responsibility, and the marketplace does nothing to cover them. A business selling on both Amazon and its own store can easily owe tax on the direct sales while assuming it is fully covered. As you add sales channels and states, the number of quiet obligations grows with you, which is exactly the shift we describe in when your growing business needs more than just an accountant.
First, do not panic, and do not ignore it. Unregistered sales tax exposure grows over time as back tax, penalties, and interest accumulate, so the sooner you address it the smaller the problem tends to be.
The usual path is to figure out exactly which states you have nexus in, then register and begin collecting going forward. For past exposure, many states offer voluntary disclosure agreements, often coordinated through the Multistate Tax Commission, that can limit how far back you owe and waive some penalties in exchange for coming forward on your own. Many states also participate in the Streamlined Sales Tax program, which standardizes parts of registration and filing across member states.
This is also a good moment to make sure the rest of your compliance is in order. Sales tax rarely travels alone, and businesses crossing state lines often pick up income tax, registration, and entity questions at the same time. Registering in a new state can even raise how your business structure affects your taxes, so it helps to look at the full picture. Our compliance team can help you do that rather than solving one piece at a time. If you are weighing whether to hand this off, our post on whether hiring an accountant is worth the cost walks through how to think about the trade-off.
Do I need to collect sales tax if I only sell online?
Possibly. Selling only online does not exempt you. If your online sales into a state cross that state’s economic nexus threshold, usually $100,000 in a year, you generally need to register and collect there. Whether a specific product or service is taxable still depends on the state.
Does sales tax nexus apply to services, or only physical products?
It can apply to both. Physical goods are taxable in most states, but many states also tax specific services and digital products. The rules vary widely, so a service that is exempt in one state may be taxable in another. It is worth checking each state where you have meaningful sales.
How do I know which states I have nexus in?
Start by pulling your sales by ship-to state for the current and prior year, then compare each state’s total against that state’s threshold. Include marketplace sales, since many states count them toward your number. If you sell into many states, this is the kind of monitoring a bookkeeping or compliance partner can automate for you.
What happens if I never registered and a state finds me first?
If a state contacts you before you come forward, you generally lose access to the friendlier voluntary disclosure terms and can owe back tax, penalties, and interest for the full period you should have been collecting. Coming forward on your own usually limits the look-back period and can reduce penalties, which is why acting early matters.
Is there a way to make multi-state sales tax less of a headache?
Yes. Sales tax automation software can calculate and file across multiple states, and pairing it with a compliance partner keeps registrations and filings on track. As always, feel free to reach out if you would like help mapping where you owe and setting up a process that runs quietly in the background.
