Economic nexus after Wayfair: the ~$100,000 threshold, FBA inventory as physical nexus, what marketplace facilitators do and don't cover, and why you register before collecting.
You must collect a state's sales tax when you have nexus there — a connection substantial enough that the state can make you its tax collector. Since the Supreme Court's Wayfair decision, physical presence is no longer required: cross a state's economic nexus threshold — most states use around $100,000 in annual sales into the state — and you owe them registration and collection, even if you've never set foot there. Physical presence still counts too, and for e-commerce sellers the sneakiest form of it is inventory sitting in a fulfillment warehouse.
The good news: marketplace facilitators like the big platforms collect and remit for sales made through them, which shrinks the problem for many sellers. The bad news: those marketplace sales often still count toward your threshold, and your direct-channel sales are entirely your responsibility. Tracking sales by state is a bookkeeping function before it's a tax function — if your channel data is a mess, start with our catch-up bookkeeping playbook and come back.
Every state with a sales tax now has an economic nexus law. The typical trigger is $100,000 of sales into the state over the current or prior calendar year, though states vary on the exact figure, the measurement period, and what counts (gross sales vs. taxable sales). A helpful simplification arrived over the last few years: many states dropped the old 200-transaction test, so a seller shipping thousands of $10 orders into a state no longer trips nexus on volume alone — dollars are what count in most places now.
Concretely: if you sell $140,000 of products into one state and $9,000 into its neighbor, you likely have economic nexus in the first and not the second. You collect that first state's sales tax on taxable sales to its customers; the neighbor gets nothing from you until you approach its threshold. Multiply that check across every state you ship to, and you can see why this is a monitoring problem as much as a legal one.
Wayfair added economic nexus; it didn't remove physical nexus. You still have nexus in any state where you have:
If you're in a fulfillment program, pull the inventory placement report and find out where your stock actually lives. That list is your starting nexus map, before you've counted a single dollar of sales. (Where your company is registered to do business is a related but separate question — our guide to running an LLC in multiple states covers foreign qualification and the income-tax side.)
Every state with a sales tax now has a marketplace facilitator law: when you sell through a qualifying marketplace, the platform collects and remits sales tax on those sales. You generally don't collect on marketplace orders, and in many states you don't even need your own registration if the marketplace is your only channel there.
But two catches keep this from being a full escape hatch:
Once you determine you have nexus in a state, the sequence is: register for a sales tax permit first, then start collecting. Collecting sales tax without a registration is illegal in essentially every state — you'd be holding tax money with no account to remit it into, which states treat as fraud, not diligence.
Registration is usually straightforward: an online application, sometimes a small fee, and the state assigns a filing frequency (monthly, quarterly, or annually, typically scaled to your volume). From then on you file returns on that schedule even for zero-sales periods — skipped filings generate notices and penalties even when no tax was due. If you crossed a threshold months or years ago and never registered, don't just quietly register today: many states offer voluntary disclosure agreements that cap the lookback and waive penalties, and it's worth getting advice before you surface.
A common conflation: crossing a sales tax threshold does not automatically mean you owe a state income tax, and vice versa. The two regimes have different standards — some states assert income tax nexus at lower activity levels than sales tax, others the reverse, and a federal law (P.L. 86-272) shields some out-of-state sellers of tangible goods from state income tax while offering zero protection on the sales tax side. Treat them as separate questions with separate answers per state, and note the deadlines differ too — our business tax deadline calendar covers the income-tax side of the schedule.
Having nexus tells you where to collect; taxability tells you what to collect on, and here the states genuinely disagree. Tangible goods are taxable almost everywhere, groceries and clothing get special treatment in some states — but SaaS, digital downloads, and digital services vary wildly: taxable in some states, exempt in others, and taxed differently depending on whether the buyer is a business or consumer in a few. If you sell software or digital products, you need a state-by-state taxability determination, not an assumption. Getting it wrong in either direction hurts — undercollecting leaves you holding the liability; overcollecting means refunding customers or remitting tax you never owed.
You don't need to panic; you need a loop:
Automation tools exist that track thresholds, calculate rates, and file returns across states, and for multi-state sellers they're usually worth it. But automation is only as good as the books feeding it — sales by state and by channel has to be reliable in your accounting system first, which is exactly the kind of structure a monthly bookkeeping service keeps current so nexus review becomes a report, not a project.
Nexus in one sentence: roughly $100,000 of sales into a state, or inventory and people physically in it — then register first, collect second, and file on schedule forever after.
Sales tax nexus is manageable if you treat it as an annual monitoring habit: know where your inventory and people are, watch your sales-by-state numbers, and register before you collect. The sellers who get hurt are the ones who discover five years of uncollected liability all at once. Taxagon's CPAs and EAs help online sellers map their nexus footprint and get compliant — if you'd rather not untangle it alone, reach out.
This article is general information, not tax advice for your specific situation. Tax law changes; figures are for the years stated.
Talk it through with a licensed US tax professional — we'll tell you honestly whether it applies to your situation.
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