If you sell online in the US, it’s possible you’ve exceeded a sales tax threshold in a state you’ve never visited. Sales tax nexus laws determine when a business is required to collect and remit sales tax in a given state, and nexus can be established through either physical presence or sales volume.

In the first quarter of 2026, US retail ecommerce sales totaled $326.7 billion. Each online seller is responsible for its own state-level tax compliance. Below, we discuss how physical and economic nexus differ, what the thresholds look like across states, and where sellers can make mistakes.

Key takeaways

• Economic nexus can be established by sales volume alone, with no physical presence in a state required.

• While most states use a $100,000 sales threshold, the rules regarding transaction counts vary, and many states have dropped the transaction threshold entirely.

• States can assess back taxes, penalties, and interest retroactive to the date a threshold was exceeded, not the date it was discovered.

What are sales tax nexus laws?

Sales tax nexus is the connection between a business and a state that creates an obligation for the business to register for, collect, and remit sales tax there. Sales tax nexus laws are the specific regulations that dictate when nexus is created in each state. Without nexus, a state has no authority to make you collect its sales tax. With nexus, you owe sales tax just like any business that operates physically within the state’s borders.

What’s the difference between physical nexus and economic nexus?

States have the authority to tax businesses with a physical presence within their borders. That presence can take several forms:

• A brick-and-mortar location: An office, store, warehouse, or distribution center physically located in the state.

• Employees or contractors: Remote workers, sales reps, or independent contractors who perform services on your behalf from within the state.

• Inventory storage: Goods held in a third-party warehouse or fulfillment center, including third-party fulfillment warehouses.

• Trade shows and temporary presence: In some states, attendance at a trade show or a few days of temporary business activity each year are enough to establish nexus.

Economic nexus works differently. It’s tied to how much sales volume a business does in a state in a given year, based on a dollar amount or the number of separate transactions.

What are the economic nexus thresholds by state?

As a result of the 2018 Supreme Court decision South Dakota v. Wayfair, a business with no employees, no offices, and no inventory in a state can still owe sales tax there purely because of its economic activity. States have largely converged on a similar threshold: $100,000 in annual sales or 200 transactions, whichever comes first. But there are some variations.

Here are the states that deviate from the dollar amount threshold:

• Alabama: $250,000 in sales, no transaction count

• California: $500,000 in sales, no transaction count

• Connecticut: $100,000 as well as 200 transactions

• Mississippi: $250,000 in sales, no transaction count

• New York: both $500,000 in sales and 100 transactions

• Texas: $500,000 in sales, no transaction count

The following states have only a $100,000 sales threshold and no transaction count: Arizona, Colorado, Florida, Idaho, Illinois, Indiana, Iowa, Kansas, Maine, Missouri, New Mexico, North Carolina, North Dakota, Oklahoma, Tennessee, Utah, Washington, Wisconsin, and Wyoming.

No state-level economic nexus

Delaware, Montana, New Hampshire, and Oregon have no sales tax and no sales tax nexus. Alaska is a unique case: it doesn’t have a statewide sales tax, but the state allows local jurisdictions to impose economic nexus requirements. The Alaska Remote Seller Sales Tax Commission established a $100,000 threshold at the municipality level.

What should you do when you exceed a nexus threshold?

Exceeding a threshold creates an immediate legal obligation to register for, collect, and remit sales tax. Here’s the sequence to follow:

• Detect when nexus is created: Track cumulative sales and transaction counts by state. Most states calculate thresholds on a calendar year basis (either the prior full year or current year to date). But tracking on a rolling 12-month basis is the safer approach since it ensures you catch any midyear nexus establishment that a calendar year tally might miss.

• Register for a sales tax permit: Once you’ve exceeded a threshold, you generally have a defined window, often 30–60 days depending on the state, to register with that state’s department of revenue before you must start collecting.

• Determine the correct rate: Rates vary by county, city, and sometimes special tax district, so the effective sales tax rate depends on the shipping address.

• Begin collecting at checkout: Once you’ve registered, apply the correct rate to every subsequent sale shipped to that state.

• File returns on the assigned schedule: States assign filing frequency monthly, quarterly, or annually, based on sales volume, and missing a deadline can trigger penalties even when the tax itself was collected correctly.

What are common nexus compliance mistakes to avoid?

Online sellers that manage multistate tax obligations can make a few common mistakes:

• Tracking sales by calendar year instead of a rolling window: Some states measure the trailing 12 months, not January through December, so a calendar year tally can miss when you exceed a threshold in the middle of the year.

• Ignoring marketplace sales when checking thresholds: Some states count sales made through a marketplace facilitator toward your threshold even though the marketplace handles the actual tax collection. Your direct-channel sales and marketplace sales together can create nexus. You wouldn’t detect this by looking at direct sales alone.

• Assuming nexus applies only to direct sales channels: Inventory that sits in a third-party warehouse for fulfillment purposes can establish physical nexus regardless of where the sale takes place.

• Forgetting that thresholds change: A state that didn’t require registration last year might lower its threshold or change its calculation method. A business that doesn’t recheck periodically can become noncompliant without any change to its own sales pattern.

What happens if you don’t comply with sales tax nexus requirements?

If a state determines that a business should’ve registered for and collected tax, it can assess the uncollected tax retroactively, often back to the date the threshold was exceeded. On top of the back taxes, states typically add the following penalties:

• Fines: These are calculated as a percentage of the unpaid tax.

• Interest: This is accrued from the original due date forward. The longer the business remains noncompliant, the larger the total balance grows.

• Audit exposure: A nexus violation found in one area of a business’s operations can prompt a state to audit other tax years or other tax types. That widens the scope of what’s being examined.

How Stripe Tax can help

Stripe Tax reduces the complexity of tax compliance so you can focus on growing your business. Stripe Tax helps you monitor your obligations and alerts you when you exceed a sales tax registration threshold based on your Stripe transactions. In addition, it automatically calculates and collects sales tax, value-added tax (VAT), and goods and services tax (GST) on both physical and digital goods and services—in all US states and in more than 100 countries.

Start collecting taxes globally by adding a single line of code to your existing integration, clicking a button in the Dashboard, or using our powerful application programming interface (API).

Stripe Tax can help you:

• Understand where to register and collect taxes: See where you need to collect taxes based on your Stripe transactions. After you register, switch on tax collection in a new state or country in seconds. You can start collecting taxes by adding one line of code to your existing Stripe integration or add tax collection with the click of a button in the Stripe Dashboard.

• Register to pay tax: Let Stripe manage your global tax registrations and benefit from a simplified process that prefills application details—saving you time and simplifying compliance with local regulations.

• Automatically collect tax: Stripe Tax calculates and collects the right amount of tax owed, no matter what or where you sell. It supports hundreds of products and services and is up-to-date on tax rules and rate changes.

• Simplify filing: Stripe Tax seamlessly integrates with filing partners, so your global filings are accurate and timely. Let our partners manage your filings so you can focus on growing your business.

Learn more about Stripe Tax, or get started today.