US sales tax nexus for online sellers, explained.

US sales tax nexus is the connection that obliges a seller to collect and remit tax in a state. Since the 2018 Wayfair decision, most states impose economic nexus once a remote seller passes a sales or transaction threshold, commonly $100,000 in sales or 200 transactions in a year, with no physical presence required.

How does US sales tax nexus work for online sellers?

Before 2018, US sales-tax obligation hinged on "physical presence": a store, an office, an employee, a warehouse. South Dakota v. Wayfair, Inc. abolished that test. The Supreme Court ruled that states could require sales-tax collection from sellers based on economic nexus: meaning sufficient sales volume into the state, regardless of physical presence.

Within 18 months, every state with a sales tax adopted some form of economic nexus rule. The typical threshold settled at $100,000 in sales or 200 transactions per state per year, but variations are material. Some states are higher ($250,000 or $500,000), some lower ($75,000), some only one threshold, some both. The fact that the criteria differ is the operational headache.

What are the state-by-state thresholds in 2026?

The major thresholds, simplified:

The numbers in the table simplify reality. The full state-by-state matrix is maintained by Avalara, TaxJar, the Streamlined Sales Tax Governing Board and others, and is genuinely complex. What matters operationally: track sales by destination state monthly. When you cross a threshold, register and start collecting. The penalties for missing a registration are typically the uncollected tax plus interest and penalty, often more than the original tax owed.

Do marketplace facilitator laws remove the obligation?

One thing has made life easier since 2019: marketplace facilitator laws. Most states now require marketplace operators (Amazon, eBay, Etsy, Walmart, Faire, etc.) to collect and remit sales tax on behalf of sellers using their platforms. For pure marketplace sellers, this means the marketplace handles sales tax. You don't need to register or remit in most states.

But two scenarios trip sellers up:

• Mixed channels. If you sell on Shopify (direct) and Amazon (marketplace), Shopify sales count toward your own nexus thresholds. The Amazon sales typically don't (in marketplace-facilitator states) but they may still count for income tax nexus, which is a separate analysis.
• States without marketplace laws. A small handful of states have weaker or absent marketplace facilitator rules. Missouri only adopted facilitator rules in 2023. Sellers using marketplaces in pre-rule periods may still have direct obligation.

Setting up Avalara or TaxJar without overpaying

Avalara AvaTax and TaxJar are the two dominant compliance tools. Both integrate with QuickBooks, Xero, Shopify, Amazon and most major platforms. Both calculate the right rate at point of sale and file returns automatically. They are not cheap: Avalara typically $5–15 per state per month plus filing fees; TaxJar similar, and overpaying is the common mistake.

What you actually need

• Nexus tracking: automated monitoring of which states you're approaching or have crossed.
• Rate calculation: accurate destination-rate calculation at point of sale, including ZIP+4 precision for states with local taxes.
• Filing in registered states only: pay for filing in states where you have nexus, not "in case" registrations.

What you don't need (despite the upsell)

• Returns filing in every state your tool supports. If you have no nexus and no obligation, the registration creates an obligation. Don't register defensively.
• Exempt-certificate management for purely B2C businesses.
• The premium "advisory" tiers when your basic compliance is straightforward, a competent accountant covers this.

Income tax nexus: the separate, often-missed conversation

Sales tax nexus is one regime. Income tax nexus is another. State corporate income tax is owed in any state where you have nexus for that purpose, typically physical presence, employees, inventory in state, or in some states economic-nexus tests at $250k–$500k of sales.

FBA sellers using Amazon's pan-state fulfilment network can trigger income-tax nexus in states where Amazon stores their inventory. This is settled law in some states (Texas, Pennsylvania) and contested in others. The conservative position: assume nexus where FBA inventory has resided, and review the income-tax position annually.

Voluntary disclosure agreements (VDAs)

If you've crossed a nexus threshold years ago and never registered, the conventional fix is a Voluntary Disclosure Agreement. The state caps the look-back period (typically three or four years instead of unlimited), waives or reduces penalties, and you settle the historic liability. This is materially better than waiting to be discovered or running an unmitigated registration.

VDAs are jurisdiction-specific work. We handle them for clients with multi-state historic exposure, typically e-commerce brands that hit nexus during the 2020 to 2022 growth spike and never caught up. That work runs alongside our e-commerce accounting service.

The biggest mistake we see: brands paying for Avalara filings in 18 states when they have nexus in 6, and ignoring the 4 states they actually have unregistered exposure in.

The bottom line

Multi-state sales tax compliance is real work but it's tractable. Track nexus monthly. Register where you cross the threshold (or use marketplace-facilitator coverage where it applies). File on schedule via Avalara or TaxJar. Address historic exposure through VDAs rather than ignoring it. The cost of doing this properly is small compared to the cost of getting caught, both in tax owed and in the reputation hit during diligence or audit.

How do you run a nexus study?

Six steps, and a competent finance person can do the first pass in an afternoon with a sales export. The point is not precision to the dollar. It is finding the states where you are already over the line and did not know.

1. Export twelve rolling months of orders with the ship-to state, the order value and the order count. Ship-to, not bill-to: the destination decides the obligation.
2. Split direct channel sales from marketplace sales. Marketplace orders are usually collected by the platform under facilitator rules, but they still tell you something about your footprint.
3. Compare each state total against that state's threshold, on that state's measurement period. Some measure the previous calendar year, some a rolling twelve months, and the difference decides borderline cases.
4. Add physical presence: inventory held in a state, remote employees, contractors, trade shows attended. Physical nexus survived Wayfair; it did not replace it.
5. Flag anything above 80 per cent of a threshold as a watch item with a registration date already pencilled in.
6. Separately assess income tax nexus, which uses different tests and different thresholds and is the part that gets skipped.

The Supreme Court opinion that started all of this is worth reading once, in South Dakota v. Wayfair, and the member state thresholds are collected by the Streamlined Sales Tax Governing Board.

What does registering in a state actually involve?

More than a form, and the sequence matters because registration is retrospective in effect. You are telling a state you have an obligation, and the first question it may ask is when that obligation began.

Registration usually requires the entity details, a federal EIN, responsible party information, an estimate of monthly taxable sales and a proposed start date. The state then assigns a filing frequency, typically monthly for larger filers and quarterly or annually for smaller ones, and that frequency is not optional. Zero returns are still due in months with no sales, and missing them collects penalties even when no tax was owed.

Worked example, illustrative rather than a real client. A direct-to-consumer brand does $2.4 million across 40 states, with $310,000 shipped to Texas across 3,100 orders and $96,000 to Georgia across 1,050 orders. Texas is comfortably over. Georgia sits under the dollar threshold but over a transaction count where the state applies one. Registering in Texas and ignoring Georgia leaves an exposure that grows every month, and at an average blended rate around 7 per cent the uncollected tax on Georgia alone is roughly $6,700 a year before penalties and interest.

What does it cost to fix historic exposure?

Less than being found, in almost every case. A voluntary disclosure agreement typically caps the look-back at three or four years, abates or reduces penalties, and settles the historic liability in one negotiated payment. Waiting instead means an unlimited look-back in most states, because the statute of limitations generally does not start running until a return is filed.

The uncomfortable arithmetic is that the tax was never yours. It should have been collected from the customer at the point of sale, and once that moment has passed it comes out of margin. A brand with three years of unregistered sales into a 7 per cent state is looking at 7 per cent of that revenue as a straight cost, which is why we would rather have this conversation in month two of an engagement than in month twenty.

We handle multi-state registrations, back filings and voluntary disclosures through our multi-state sales tax compliance service, for the businesses covered on accountants for US small businesses. Most of that work runs in QuickBooks with an automation layer, which is why QuickBooks ProAdvisor accountants is the software page that pairs with this one. Sellers on marketplaces should read Amazon FBA accountants and Shopify accountants, direct brands should read our e-commerce accounting service, and anyone whose ledger cannot produce a clean state-by-state export in the first place should start with catch-up bookkeeping. The chart of accounts that makes this reporting possible is set out in the Shopify and Amazon FBA chart of accounts.