Sales Tax Nexus for Online Sellers: Your Post-Wayfair Guide

#What changed when Wayfair was decided

#The physical presence rule before 2018

Before June 2018, the rule came from Quill Corp. v. North Dakota (1992). Under Quill, a state could only require you to collect sales tax if you had physical nexus there — a store, warehouse, office, or employee. Sell a million dollars of products into California from your home in Texas? California could not touch you for sales tax purposes.

That changed with South Dakota v. Wayfair, Inc., 585 U.S. 162 (2018). South Dakota had passed a law requiring any out-of-state seller exceeding $100,000 in sales or 200 transactions into the state to collect sales tax — physical presence or not. The Supreme Court upheld the law and created the modern economic nexus standard: substantial economic activity in a state is enough to trigger a collection duty, even if you have never set foot there.

#What “sales tax nexus” actually means

Nexus is the legal connection between a seller and a state that requires the seller to collect and remit that state’s sales tax. Before Wayfair, nexus was almost always physical. After Wayfair, nexus is primarily economic for most remote sellers.

Two types of nexus now exist in parallel:

• Physical nexus: office, employee, inventory, warehouse, or trade show presence in the state
• Economic nexus: exceeding a dollar or transaction threshold set by state law

You can have both at once. Many online sellers have physical nexus in their home state (they operate from there) and economic nexus in a dozen or more other states as sales grow.

#Why this is separate from income tax nexus

Just so you know: this article is specifically about sales tax nexus. That is a separate question from income tax nexus — when you owe corporate or personal income tax to another state. The two systems use similar vocabulary but have different thresholds, different forms, and different consequences.

For the income tax nexus question, read our guide on multi-state nexus considerations. For sales tax, keep reading.

#How economic nexus thresholds work state by state

#The $100K / 200-transaction standard is common but not universal

All 45 sales-tax states plus D.C. have enacted economic nexus laws. The most common threshold is $100,000 in gross sales OR 200 separate transactions into the state in a calendar year, based directly on the South Dakota law the Court upheld. But states are not uniform:

• California and Texas set their threshold at $500,000 in sales — a far higher bar than most states
• New York uses $500,000 in sales AND at least 100 transactions
• Connecticut requires both $100,000 in sales AND 200 transactions (not “or” — you need to hit both prongs)
• Kansas, Ohio, and others have dropped the 200-transaction prong entirely and rely only on a dollar threshold
• Illinois will remove its 200-transaction threshold effective January 1, 2026, relying solely on $100,000 in sales

The bottom line: you cannot assume every state uses the same rule. A seller doing 250 small transactions totaling $12,500 might trigger nexus in a state with an “or 200 transactions” test even though revenue is low. A seller doing $400,000 in California might not have nexus there yet.

#When the threshold measurement starts over

Most states measure thresholds against either the current or prior calendar year. That means you can cross the threshold mid-year and owe sales tax on the rest of that year’s sales once you hit the line. Most states require registration within 30 to 60 days of crossing the threshold. Waiting longer increases your exposure.

#The five states with no statewide sales tax

Alaska, Delaware, Montana, New Hampshire, and Oregon have no statewide sales tax. Selling into those states does not create state-level sales tax nexus. One caveat: Alaska allows municipalities to impose local sales taxes, and some Alaskan municipalities have adopted local economic nexus rules — so “no state sales tax” does not mean completely clean if you sell high volume into Alaska.

#Physical nexus still triggers collection duties too

#Amazon FBA sellers face a special physical nexus trap

Economic nexus is the new rule. But physical nexus still exists and still creates a collection duty — sometimes triggered at far lower volume than economic nexus thresholds.

If you sell through Amazon’s Fulfilled by Amazon (FBA) program, Amazon stores your inventory in warehouses across the country. The moment your inventory lands in a warehouse in, say, Pennsylvania or Georgia, you have physical nexus in that state — regardless of whether you have crossed any economic nexus dollar threshold.

This catches FBA sellers off guard constantly. Amazon may collect and remit sales tax on FBA sales through its marketplace facilitator status (covered next), but physical nexus from inventory storage can create obligations on your own website or direct sales channels in those same states.

#Other common physical nexus triggers

Beyond FBA inventory, physical nexus is created by:

• Remote employees or contractors working from a state — a customer service rep working from home in Ohio creates Ohio physical nexus for your business
• Trade show attendance with product sales — most states treat trade show sales as creating nexus
• Third-party warehouses or dropshipping fulfillment centers located in a state, depending on how the arrangement is structured

The practical result for an active FBA seller: you likely have physical nexus in 15 to 20 states from inventory placement alone, plus economic nexus in additional states where your own-site sales volume is high. The multi-state picture adds up fast.

#Marketplace facilitator laws and when platforms cover you

#What marketplace facilitator coverage includes

Here is the good news for most marketplace sellers: you are probably already covered for sales made through Amazon, Etsy, Walmart Marketplace, eBay, and most major platforms.

Marketplace facilitator laws require the platform (the “facilitator”) to collect and remit sales tax on behalf of third-party sellers. All 45 sales-tax states plus D.C. have enacted marketplace facilitator laws. When you sell through Amazon or Etsy, the platform:

1. Calculates the correct sales tax for each order based on the buyer’s shipping address
2. Collects the tax from the buyer at checkout
3. Remits the tax directly to the state on your behalf

You do not collect the tax. You do not file sales tax returns in those states for those sales. The Form 1099-K you receive from the platform reflects your gross sales, but the sales tax side is the platform’s obligation.

#The critical exception: your own website and direct channels

Marketplace facilitator laws only cover sales made through the marketplace. If you also sell through your own Shopify store, direct invoices, social media payment links, a brick-and-mortar location, or trade shows, you are responsible for collecting and remitting sales tax on those sales.

The marketplace facilitator rules do not help you there. If your Shopify revenue crosses $100,000 in Ohio, or $500,000 in Texas, you need to register in those states and collect on your own.

#Calculating your real-dollar exposure

#A worked example: Shopify + Etsy seller in multiple states

Here is a concrete scenario. Round numbers to make the math clear.

Scenario: An online seller of handmade goods does $420,000 per year in total sales across Etsy and her own Shopify store. Home state is Florida.

Sales breakdown:

• Florida (home state): $80,000. She is registered, collects, and remits Florida sales tax.
• Etsy sales across 30+ states: $190,000. Etsy’s marketplace facilitator coverage handles collection and remittance in all 45 sales-tax states.
• Shopify sales into Texas: $95,000. Texas threshold is $500,000. No nexus yet.
• Shopify sales into Georgia: $52,000. Georgia threshold is $100,000. No nexus yet.
• Shopify sales into Ohio: $108,000. Ohio threshold is $100,000. She crossed it 9 months ago.

The Ohio problem: she has owed Ohio sales tax on her Shopify sales since crossing the threshold 9 months ago. Ohio’s statewide average sales tax rate is roughly 7.2%. On $108,000 of Shopify sales:

$108,000 × 7.2% = $7,776 of sales tax she should have collected but did not.

Ohio can assess that uncollected tax against her — plus interest (commonly 5 to 7% per year) and penalties (often 25 to 50% of the tax owed) if they find it before she comes forward voluntarily.

On one state’s threshold crossing alone: $7,776 in tax, plus up to $3,888 in penalties, plus interest.

#How penalties and interest amplify the raw exposure

Scale that to a seller who crossed thresholds in five states three years ago without noticing. The uncollected tax alone can reach $40,000 to $80,000. Add penalties and interest and you are looking at six figures of exposure from a business that may be doing perfectly well on the income side.

The math is not designed to scare you — it is designed to motivate the assessment step in the next section. Catching this early means the VDA path is still available. Catching it when a state auditor calls means penalties are essentially unavoidable.

#How to assess where you owe and what to do next

#Pull your sales data by state for the last 3 years

Your payment processor (Stripe, PayPal, Square) or your Shopify and WooCommerce backends can export orders with shipping addresses. Pull that data by state. Total the revenue per state per year.

Compare those totals against each state’s threshold. Wherever you have crossed the threshold and have not registered, you have exposure.

As you do this assessment, note:

• Use the threshold rules for each specific state, not just $100,000 everywhere
• Count transaction volume as well as dollar volume in states that still use the “or 200 transactions” prong
• Exclude marketplace-facilitated sales in states where the platform collected on your behalf
• Include the prior year and the current year-to-date

States with the largest populations generate the most risk for most sellers: California, Texas, Florida, New York, Illinois, Ohio, Pennsylvania, Georgia, Michigan, and North Carolina. If you are doing meaningful Shopify or direct sales volume into any of those states and are not registered, verify your numbers carefully.

#Voluntary Disclosure Agreement: the lowest-penalty catch-up path

A Voluntary Disclosure Agreement (VDA) is a formal arrangement between you and a state in which you come forward, disclose your exposure, and pay what you owe in exchange for:

• Limited lookback period: most states cap the back period at 3 to 4 years, rather than assessing liability going back to when you first crossed the threshold years ago
• Penalty abatement: states typically waive or significantly reduce penalties for sellers who come forward through a VDA
• Interest reduction: some states reduce or waive accrued interest as part of a VDA

The critical rule: you must come forward before the state contacts you. If a state sends a nexus questionnaire or audit notice before you file a VDA, you lose VDA eligibility. At that point, the full lookback period with full penalties applies.

VDAs are filed with individual states. If you have exposure in eight states, you file eight VDAs. There is also a multistate streamlined path through the Streamlined Sales Tax project for sellers dealing with many states at once.

#Prospective registration without back filing

In some situations, particularly where prior-year exposure is small, a seller can choose to register going forward and begin collecting without filing back returns. This leaves past liability unresolved. Some sellers take this path when the estimated prior exposure is lower than the cost and administrative burden of filing back returns and VDAs.

This is not a decision to make casually. Registering in a state can sometimes prompt a backward look from the state’s audit function. Get professional input before choosing this path. Our tax return services include multi-state nexus analysis for online sellers at exactly this decision point.

If you are running an LLC or S-corp, the entity structure affects which taxpayer is on the hook for uncollected sales tax. It is worth reading about LLC formation considerations alongside the nexus question to make sure your structure is right before taking any compliance steps.

#Registering, filing, and staying compliant going forward

#How to register in a new nexus state

Once you have identified the states where you have nexus, registration is the first step:

• Streamlined Sales Tax Registration System (SSTRS): a free, multi-state registration portal covering 24 member states. One form registers you in all participating states simultaneously.
• Individual state portals: each state’s Department of Revenue or Department of Taxation has an online registration system. Most take 10 to 30 minutes per state.
• Most states issue a sales tax permit within 1 to 2 weeks. You cannot legally collect sales tax until you have the permit.

When registering, you will need your EIN, business entity information, start-of-nexus date, and estimated annual sales volume in the state.

#Ongoing filing cadence and sales tax software tools

Once registered, your filing schedule depends on your sales volume in each state. High-volume states typically require monthly filing; lower-volume states allow quarterly or annual. Missing a filing deadline triggers automatic penalties in most states.

Tools that reduce the ongoing compliance burden:

• Avalara or TaxJar — integrate with Shopify, WooCommerce, Amazon, and most platforms to automate rate calculation, return preparation, and remittance
• Shopify Tax — built-in sales tax collection and basic reporting for sellers on Shopify
• Taxify / Numeral — newer entrants with strong multi-state automation for ecommerce sellers

For sellers with S-corp or multi-entity structures, the nexus question gets layered. The sales tax obligation follows the entity making the sale. See our overview on S-corp state tax obligations for how multi-state compliance interacts with entity-level tax planning.

#Common questions

Does sales tax nexus apply to services, or just physical products? Sales tax generally applies to tangible personal property. Services are taxable in some states but not others. Digital products and SaaS are treated inconsistently — some states tax them, many do not. If you sell services or digital goods, your nexus analysis depends on how each state classifies your specific product category. This is one of the areas where a quick advisory check is worth the time before you assume you are clean.

If Amazon collects sales tax on my FBA sales, do I still need to register in states where my inventory is stored? Potentially yes, for your own direct-channel sales. Amazon’s marketplace facilitator obligation covers sales made through Amazon. But FBA inventory stored in a state creates physical nexus for your business, which may require registration and collection on your own website or direct sales into that state.

What is the difference between sales tax nexus and income tax nexus? They use the same word but are separate legal questions. Sales tax nexus determines whether you must collect and remit sales tax. Income tax nexus determines whether you must file a business or personal income tax return in a state and pay income tax there. Crossing one threshold does not automatically create the other, though significant overlap exists for high-volume sellers in states like Texas and California.

What happens if I register late without a VDA? You are exposed to the state’s standard penalty and interest regime. Penalties for late registration and uncollected tax typically run 10 to 50% of the tax owed, plus ongoing interest. Some states have informal first-time-abatement programs even outside a formal VDA, but those are discretionary, not guaranteed.

How do I find my exact threshold crossing date? Your order export by state will show when cumulative sales hit $100,000 (or whatever the state threshold is) for the year. That date is your crossing date. Most states require registration within 30 to 60 days after crossing. From the registration date forward, you must collect.

Can I create nexus just by attending a trade show in a state? Yes, in many states. Trade show attendance with product sales is a classic physical nexus trigger. Some states provide a safe harbor for limited trade show activity (one or two events per year with low sales volume), but others do not. Know the rules before selling at events in states where you are not registered.

Does economic nexus reset at the start of each year? Most economic nexus thresholds are measured on a calendar-year or trailing-12-month basis. If you fall below the threshold in a given year, some states allow deregistration — but the specific state’s rules apply. Physical nexus from a permanent presence (warehouse, employee) does not reset; it persists until the physical presence ends.

I sell only through Etsy. Do I need to register anywhere for sales tax? If Etsy is your only sales channel, Etsy’s marketplace facilitator coverage handles sales tax collection in all 45 sales-tax states for your Etsy sales. You likely do not need to register independently for those sales. Just so you know: your 1099-K from Etsy reflects gross sales, which is a separate question from your sales tax filing obligation. If you ever add your own website or direct sales, that changes the analysis.

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Sales tax exposure across multiple states is the kind of thing online sellers discover at the worst possible moment — during a business sale, a loan review, or when a state audit notice lands in the mail. We work with ecommerce sellers and content creators to get the nexus picture clean before that moment arrives.

Book a 15-minute Tax Discovery and we will walk through your state-by-state sales data, identify where you have real exposure, and map out the fastest path to clean compliance. Free advice either way.