Economic Nexus for Sales Tax After Wayfair: What Businesses Must Know

If your business sells goods or services to customers in other states, you may be required to collect sales tax there, even without a single employee, office, or warehouse in that state. Economic nexus rules, triggered by dollar volume of sales rather than physical presence, now apply in virtually every state with a sales tax. The threshold in most states is $100,000 in annual in-state sales. Once you cross it, you must register, collect, and remit.

What Is Economic Nexus Sales Tax and Why Does It Matter?

“Nexus” is the legal connection between a seller and a state that gives the state the right to require that seller to collect and remit sales tax. Before 2018, nexus required a physical presence: a store, a warehouse, an employee, or inventory stored in the state. Remote and online sellers could sell freely across state lines without triggering a collection obligation.

The Supreme Court changed that on June 21, 2018, when it decided South Dakota v. Wayfair, Inc.. The Court overruled the physical presence standard it had established in Quill Corp. v. North Dakota (1992) and held that a state may impose sales tax collection duties on a seller based purely on economic activity in the state. The ruling validated South Dakota’s law, which imposed nexus on sellers with either $100,000 in annual sales into the state or 200 or more separate transactions, regardless of physical presence.

The practical result was swift. Within a few years, every state that has a sales tax enacted an economic nexus law. As of mid-2026, there are no remaining holdouts among the 45 states (plus the District of Columbia) that impose sales tax.

Why the Stakes Are High

Failure to register and collect in a state where you have economic nexus exposes your business to uncollected tax liability, interest, and penalties. When an audit surfaces a multi-year gap in compliance, the state can assess back taxes to the date the threshold was first crossed. Depending on the state and the look-back period, that liability can reach years of uncollected tax on every taxable sale. Many CFOs and controllers at growing mid-market companies underestimate this exposure until it surfaces during due diligence for a financing round or an acquisition.

How Wayfair Changed the Rules for Remote Sellers

The Wayfair decision rested on a straightforward economic logic: a business that generates millions of dollars in revenue from customers in a state has availed itself of that state’s infrastructure, legal system, and marketplace. Requiring it to collect sales tax is no different, in principle, from requiring a brick-and-mortar retailer to do the same.

The Court identified several features of South Dakota’s law that made it constitutional. First, the threshold was high enough to exclude small sellers. Second, South Dakota had adopted the Streamlined Sales and Use Tax Agreement, a multistate framework designed to simplify compliance. Third, the law did not apply retroactively, protecting sellers from back-tax liability for periods before the law took effect.

Those structural guardrails mattered for the constitutional analysis, but they did not bind other states. States have enacted their own economic nexus laws with varying thresholds, look-back periods, and effective dates. The result is a patchwork that requires businesses to track their sales figures on a state-by-state basis throughout the year.

The Shift Away from Transaction Counts

South Dakota’s original law included both a dollar threshold ($100,000) and a transaction count (200 transactions). Many states copied that two-part test. In practice, the transaction count created nexus for sellers doing high volumes of very small sales, generating compliance burdens far out of proportion to the tax revenue at stake.

Starting in 2021 and accelerating through 2025 and 2026, states began dropping the transaction-count component. As of August 2026, at least 17 states have eliminated the 200-transaction threshold entirely. Illinois removed it on January 1, 2026. Kentucky followed on August 1, 2026. Several others, including Iowa, Wisconsin, and New Mexico, made the same change in 2025. The trend is clear: most states are moving toward a revenue-only standard, and sellers should expect more states to follow.

The State-by-State Threshold Landscape in 2026

The Sales Tax Institute’s Economic Nexus State Chart is the most frequently cited resource for current thresholds. Here is a summary of where things stand as of mid-2026.

The $100,000 Majority

Of the 46 sales tax jurisdictions (45 states plus the District of Columbia), 41 set the dollar threshold at $100,000 in annual in-state gross sales or gross revenue. That figure comes directly from South Dakota’s original statute and has become the de facto national standard. Crossing $100,000 in a calendar year or the prior calendar year is the trigger in most states.

Higher-Threshold States

A small group of states set the bar significantly higher:

• California and Texas: $500,000 in annual in-state sales, no transaction count.
• New York: more than $500,000 in in-state sales AND more than 100 separate transactions, measured over the immediately preceding four sales tax quarters. Both tests must be met.
• Alabama: $250,000.
• Mississippi: $250,000.

For businesses that sell primarily in these large markets, the higher threshold provides meaningful headroom. A company with $400,000 in California sales has no collection obligation in California yet, while the same revenue level would trigger nexus in 41 other states.

States with No Sales Tax

Four states impose no general sales tax: New Hampshire, Oregon, Montana, and Delaware. There is no economic nexus obligation in those states because there is no sales tax to collect. Alaska has no statewide sales tax but allows municipalities to impose local sales taxes, and a voluntary statewide framework applies a $100,000 threshold for remote sellers into Alaska municipalities.

What Counts Toward the Threshold

Most states measure economic nexus against gross sales or gross revenue delivered into the state, including taxable and exempt sales. Some states exclude certain categories, such as sales made through a marketplace facilitator if the facilitator is already collecting the tax. Sellers should review each state’s specific definition before assuming exempt or marketplace sales reduce their threshold exposure.

Marketplace Facilitator Laws and Nexus Overlap

If you sell through Amazon, Etsy, Walmart Marketplace, or another major platform, the marketplace is likely already collecting and remitting sales tax on your behalf in most states. Every state with a sales tax has enacted a marketplace facilitator law that shifts collection responsibility from third-party sellers to the platform.

That does not necessarily eliminate your own nexus exposure. Several states count marketplace sales toward a seller’s economic nexus threshold even when the marketplace collects the tax. If your combined direct and marketplace sales into a state exceed the threshold, you may have registration or reporting obligations even though the marketplace handles the actual tax collection. The practical risk is that you cross a threshold you were not monitoring because you assumed the marketplace handled everything.

For businesses with direct channels alongside marketplace channels, tracking aggregate in-state revenue across all sales channels is the only reliable approach. Modus advisors work with companies to build that monitoring into existing financial systems so the obligation is caught before it creates a filing gap. Learn more at modusalliance.com/services/.

What to Do Once You Have Economic Nexus

Step 1: Determine Where You Have Nexus

Run a nexus study against your current and prior-year revenue by state. The analysis should cover direct sales, sales through marketplaces (net of amounts collected by the facilitator), and any physical presence factors that might independently create nexus. Ongoing monitoring is necessary because thresholds are measured against trailing twelve-month or calendar-year revenue, so a fast-growing business can cross a threshold mid-year.

Step 2: Register in Each State

Once you have identified states where the threshold is met, you need a sales tax permit in each state before you begin collecting. Most states require registration within a short window, often 30 to 60 days, after nexus is established. Registration is done through each state’s department of revenue. Many states now offer streamlined online registration.

Step 3: Collect and Remit on Time

Each state has its own tax rates, filing frequency (monthly, quarterly, or annually, typically based on volume), and due dates. Rates also vary at the county and city level in many states. Using automated sales tax software that applies destination-based rates at the transaction level is standard practice for any business selling across multiple states.

Step 4: Address Historical Exposure

If a company has been selling into states without collecting, the next question is how to resolve the back-period liability. Most states offer Voluntary Disclosure Agreements (VDAs). Under a VDA, the state typically limits the look-back period, often to 3 or 4 years, and waives or reduces penalties in exchange for voluntary disclosure and payment of the tax owed. VDAs must be initiated before the state contacts you, so timing matters. Businesses with multi-state sales going back several years and no collection history should consider a VDA process as a priority. Modus can help assess exposure and structure the disclosure process as part of a broader tax advisory engagement.

Special Situations to Watch

Service businesses and software: Economic nexus rules apply to services and digital products in states that tax them, not just physical goods. SaaS companies, professional services firms with remote clients, and subscription businesses should not assume that only product sellers face nexus obligations.

Exemptions and certificates: Collecting sales tax in a new state requires understanding which products or services are taxable in that state. Taxability rules differ significantly. Food, medical products, and digital services are taxed differently across states. Failing to tax a taxable item, or taxing an exempt one, creates its own compliance risk.

Acquisitions: When a company acquires another business, it inherits the target’s nexus history and, potentially, its uncollected tax liability. Economic nexus exposure is now a standard due diligence item in M&A transactions. Buyers who skip this review can find themselves funding a multi-state sales tax liability that no one disclosed.

Related reading: State and Local Tax Planning for Multistate Businesses

Frequently Asked Questions

When do I have economic nexus in a state?

You have economic nexus in a state when your sales into that state, measured over the current or prior calendar year, exceed the state’s threshold. In most states, that threshold is $100,000 in gross sales. A few states use higher thresholds ($250,000 or $500,000), and New York requires both more than $500,000 in sales and more than 100 transactions. Once the threshold is met, you are generally required to register and collect sales tax starting with the next filing period or, in some states, immediately.

Does selling through Amazon or another marketplace mean I don’t have to worry about economic nexus?

Not entirely. Marketplace facilitator laws require platforms like Amazon to collect and remit sales tax in every state with a sales tax. However, in many states, those marketplace sales still count toward your economic nexus threshold. If your total in-state sales, including marketplace sales, exceed the threshold, you may have registration or reporting obligations even though the platform handles the tax collection. Verify each state’s rules for your specific situation.

What happens if I didn’t register when I should have?

The state can assess uncollected sales tax going back to the date your threshold was first exceeded, plus interest and penalties. The practical path forward for most businesses is a Voluntary Disclosure Agreement. VDAs typically cap the look-back period at 3 to 4 years and waive penalties in exchange for voluntary registration and payment. You must initiate a VDA before the state audits you or contacts you directly.

Do economic nexus rules apply to service companies, not just product sellers?

Yes, in states that tax services or digital products. SaaS subscriptions, digital downloads, consulting services, and similar offerings are taxable in many states. The economic nexus analysis applies the same way: if your revenue from taxable sales into a state exceeds the threshold, you have a collection obligation. The threshold does not distinguish between goods and services.

Which states do not have economic nexus?

New Hampshire, Oregon, Montana, and Delaware impose no general sales tax, so there is no sales tax economic nexus obligation in those states. All other states with a sales tax have enacted economic nexus rules. Alaska has no statewide sales tax but has a local-option framework with a $100,000 threshold for remote sellers.

How do I monitor nexus thresholds across multiple states on an ongoing basis?

Most mid-market businesses use sales tax automation software (such as Avalara, TaxJar, or Vertex) integrated with their ERP or e-commerce platform to track in-state revenue in real time and flag when thresholds are approaching. Combining that software with a periodic nexus review, at minimum annually and more frequently during high-growth periods, is the standard approach. Your tax advisor should be part of the annual review, especially if you are entering new markets or launching new product lines.