Sales tax nexus determines when a state can require your business to collect and remit sales tax—even if your business is located somewhere else entirely.
Let’s say you’re a ski clothing retailer with an online store. You’re based in Reno, Nevada, and 40% of your sales are shipped to customers in Colorado. At what point does the Colorado Department of Revenue stop and say, “Wait a minute?”
That question is answered by sales tax nexus.
How Sales Tax Nexus Used to Work
For a long time, states relied on a physical presence test. If your business had a store, office, warehouse, or employees in another state, that state could require you to collect sales tax.
In our example, if your Reno-based ski company opened a shop in Aspen or Vail, Colorado could tax those sales. If you didn’t, they couldn’t.
Then everything changed.
South Dakota vs. Wayfair
South Dakota vs. Wayfair was a Supreme Court case involving Wayfair, an online furniture company based in Massachusetts. South Dakota wanted Wayfair to collect sales tax on purchases made by South Dakota residents.
Wayfair argued they had no employees, offices, or stores in the state—so no obligation to collect tax. The Supreme Court disagreed and ruled in favor of South Dakota.
This decision eliminated the physical presence requirement and replaced it with economic nexus.
What Sales Tax Nexus Means Now
Sales tax nexus is established when a business reaches a certain level of sales or transactions in a state—even without a physical presence. Once that threshold is met, the business must collect and remit sales tax to that state.
Each state sets its own rules, usually based on:
- Total sales revenue in the state
- Number of transactions shipped into the state
Most states use thresholds of $100,000 in sales and/or 200 transactions. Some states, like Texas and California, set higher thresholds around $500,000.
States Without Statewide Sales Tax
There are a few exceptions worth knowing:
- Delaware
- New Hampshire
- Montana
- Oregon
- Alaska (though some municipalities still impose sales tax)
Mostly good job, Alaska—but still check local rules.
What This Means for You
If you’re making under $80,000 per year spread across multiple states, this likely isn’t an emergency. But it is something you should be tracking.
Sales tax laws are simply catching up to the reality of ecommerce. Online businesses now need systems to track sales across platforms and states so nothing slips through the cracks.
Tools like QuickBooks Commerce, TaxJar, or Avalara can help track sales, thresholds, and compliance across Amazon, Shopify, eBay, and other platforms.
Where Bookkeeping Comes In
Sales tax issues become much harder to fix if your books are months—or years—behind.
As your bookkeeper, I help business owners:
- Track income and expenses accurately
- Stay organized for tax season
- Prepare clean records for sales tax compliance
- Generate reports that actually support decision-making
Most clients save 80+ hours a year compared to doing it all themselves. If you want to make sure your business stays compliant without drowning in admin work, schedule a call with me and we’ll talk through your bookkeeping strategy.