US Sales Tax Nexus: State-by-State Guide for Online Sellers

The 2018 Supreme Court decision in South Dakota v. Wayfair, Inc. transformed US sales tax compliance for online sellers. Before Wayfair, sellers only had to collect sales tax in states where they had physical presence. After Wayfair, states can require collection based solely on economic activity — selling enough into a state creates nexus, even if you have never set foot there.

In the six years since Wayfair, every state with a sales tax has enacted economic nexus laws, marketplace facilitator legislation, and additional provisions targeting the digital economy. For eCommerce sellers, digital product companies, and SaaS providers, understanding nexus — where you have it, what it means, and how to comply — is now a fundamental compliance requirement, not an afterthought.

Key Takeaways

• 45 states (plus DC) have sales tax; Alaska, Delaware, Montana, New Hampshire, and Oregon do not
• Economic nexus threshold: most states use $100,000 in sales or 200 transactions in the state in the prior or current calendar year
• Marketplace facilitator laws: Amazon, eBay, Etsy, and most major platforms collect and remit on your behalf in all 45 states
• Physical nexus still applies: employees, office space, inventory, warehouses, or contractors in a state create nexus from dollar one
• Product taxability varies dramatically by state: clothing, food, digital goods, and SaaS have different rules in every state
• Registration is required in each nexus state before you begin collection — retroactive registration creates back taxes, interest, and potential penalties
• Voluntary Disclosure Agreements (VDAs) allow companies to come into compliance for prior periods with reduced penalties
• Streamlined Sales Tax (SST) registration covers 24 participating states through one application

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Understanding Nexus: Physical vs. Economic

Physical nexus (traditional):

Physical nexus was the only standard before Quill Corp v. North Dakota (1992) and until Wayfair (2018). Physical nexus is created by:

• Office, store, or other place of business in the state
• Employees, sales agents, or independent contractors working in the state
• Inventory stored in the state (including Amazon FBA fulfilment centres)
• Trade show attendance in some states (typically if you make sales at the show)
• Drop-shipping through a fulfilment company with warehouses in the state

FBA sellers: Having inventory stored at Amazon's fulfilment centres creates physical nexus in any state where an FC is located. This means most FBA sellers have nexus in 20+ states based on Amazon's warehouse network alone — regardless of the level of sales in any particular state.

Economic nexus (post-Wayfair):

Economic nexus is triggered by sales activity. Most states use a combined threshold: $100,000 in sales into the state OR 200 or more separate transactions into the state within the current or prior calendar year. Sellers that exceed either prong must register and collect.

Important: Transactions-based vs. sales-based thresholds:

Some states use only the dollar threshold and have eliminated the 200-transaction prong. Others retain both. The transaction count test can catch small-ticket sellers who do high volumes — 200 transactions at $5 each is only $1,000 in sales but triggers nexus in most states.

Affiliate nexus:

If you pay commissions to bloggers, affiliates, or referral partners in a state, some states treat this as creating nexus. Texas, New York, and California have had affiliate nexus rules dating back before Wayfair.

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Economic Nexus Thresholds: All 45 States

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Marketplace Facilitator Laws

Marketplace facilitator laws shift sales tax collection responsibility from individual sellers to the marketplace platform. As of 2026, all 45 states with sales tax (plus DC and Puerto Rico) have enacted marketplace facilitator laws.

What marketplace facilitators do:

Designated marketplace facilitators (Amazon, eBay, Etsy, Walmart Marketplace, Shopify in certain contexts, Airbnb, VRBO, etc.) collect sales tax from buyers and remit it to states on behalf of third-party sellers. The seller's own nexus status becomes largely irrelevant for marketplace sales — the platform handles compliance.

Coverage across states:

Amazon operates as a marketplace facilitator in all taxing jurisdictions. eBay, Etsy, and Walmart Marketplace do the same. When these platforms collect and remit sales tax, sellers do not include those sales in their own returns — the marketplace handles it entirely.

What is not covered:

Your own website sales are not covered by marketplace facilitator laws. If you sell through Shopify, WooCommerce, or any direct-to-consumer channel, you remain responsible for sales tax collection and remittance on those sales.

Seller responsibilities under marketplace facilitator regimes:

Even if a marketplace remits your tax, you may still need to include marketplace sales in calculating your economic nexus threshold for your own direct channel sales. Additionally, if you sell in both marketplace and direct channels in a state, you may have nexus for your direct channel based on activity including marketplace sales.

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Product Taxability: What Is Taxable and What Is Not

Sales tax product taxability is one of the most complex aspects of multi-state compliance. Unlike VAT (which has clear categories), US sales tax taxability is determined state by state with thousands of nuanced rules.

Clothing and apparel:

New York exempts clothing and footwear under $110 per item. Pennsylvania exempts most clothing. Minnesota exempts most clothing. Most other states tax clothing at the standard rate. Athletic equipment is generally taxable even where clothing is exempt.

Food and groceries:

Most states exempt unprepared food (groceries). But "prepared food" (ready-to-eat, heated, or with eating utensils provided) is typically taxable. Candy and soft drinks are taxable in most states that otherwise exempt food. The line between grocery and prepared food is heavily litigated.

Digital goods and software:

This is where complexity peaks. States fall into three broad categories:

• States that tax digital goods broadly (Texas, Washington, Minnesota, Indiana)
• States that tax some digital goods but not others (California taxes downloaded software but not music/videos)
• States that do not tax digital goods (Florida, Colorado, New Hampshire, Oregon)

SaaS:

Taxability of Software as a Service varies by state:

• Taxable: Texas (18%), Washington, New York, Pennsylvania, Massachusetts, Connecticut
• Not taxable: California (software accessed via cloud not taxable as software), Florida, Illinois, Virginia
• Gray areas: Many states have not issued guidance on SaaS specifically

Services:

Services are generally not taxable at the state level, but several states are expanding taxability:

• Hawaii taxes virtually all services
• New Mexico taxes most services
• South Dakota taxes many services
• Texas taxes specific services (data processing, telecommunications)
• Washington, DC taxes many professional services

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Registration and Filing After Nexus Is Established

Step 1: Determine your nexus states

Run your sales by state for the last 12 months and the current year-to-date. For each state with a sales tax, compare your total sales amount and transaction count to the economic nexus threshold. Also identify states where you have physical nexus (employees, inventory, office).

Step 2: Register before you collect

You must register in each nexus state before you begin collecting sales tax. Collecting without registration exposes you to liability for collected-but-unremitted tax plus penalties. Registration is typically free, though some states charge small fees.

For registering in many states simultaneously, use the Streamlined Sales Tax Registration System (SSTRS) which covers 24 SST member states in one application. For non-SST states, register through each state's revenue department online portal.

Step 3: Configure your platform

After registration, configure your eCommerce platform (Shopify, WooCommerce, Amazon Seller Central) or billing system to collect the correct tax rate for each state and product combination. Nexus rules, tax rates (state + county + city + special district), and product taxability must all be correct. Rate databases change constantly — use a tax automation tool (TaxJar, Avalara, Vertex) to maintain accurate rates automatically.

Step 4: File and remit

Filing frequency varies by state: monthly (high-volume sellers), quarterly (mid-volume), or annually (low-volume). Returns are typically due on the 20th of the month following the period end, but deadlines vary. Late filing penalties range from 5% to 25% of the tax owed. Set up automatic ACH payments and electronic filing where available.

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Voluntary Disclosure Agreements (VDAs)

If you have established nexus in states where you were not collecting sales tax, you have a liability problem. The options are: ignore it (dangerous), register and hope no one looks back, or pursue a Voluntary Disclosure Agreement.

What a VDA offers:

A VDA is a negotiated agreement with the state where you come into compliance voluntarily in exchange for:

• Limited lookback period (typically 3 years, sometimes less)
• Penalty waiver or reduction
• Protection from further audit for the disclosed period

VDA process:

Most states allow "anonymous" VDA applications — you (or your tax advisor) approach the state without disclosing your identity initially, negotiate terms, and only reveal identity upon acceptance of the agreement. Some states participate in the Multistate Tax Commission (MTC) Amnesty Programme, which allows multi-state VDAs simultaneously.

Calculating back liability:

You will need to estimate or calculate actual sales by state for the lookback period. For a three-year lookback, pull your sales data by customer address and calculate the estimated tax owed at each state's applicable rate. This calculation often requires the assistance of a sales tax professional.

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Automating Sales Tax Compliance

Manual multi-state sales tax compliance is not scalable beyond 3–5 states. Most businesses with nexus in 10+ states use automation tools.

Leading sales tax automation platforms:

TaxJar: Best for eCommerce businesses on Shopify, Amazon, and WooCommerce. Monthly pricing from $19 (basic) to $99 (plus). AutoFile feature automatically submits returns in all nexus states. Real-time calculation API for checkout.

Avalara AvaTax: Enterprise-grade platform used by mid-market and enterprise companies. Integrates with NetSuite, SAP, Odoo, Salesforce, and most major ERPs. More expensive ($50–$200+/month for core, higher for enterprise) but more powerful exemption certificate management and audit trail.

Vertex: Enterprise focus. Typically $300+/month. Strong product taxability database. Preferred by large manufacturers and distributors with complex product taxability.

Stripe Tax: Built into Stripe payments. Automatic calculation and collection at checkout for businesses using Stripe. Limited reporting; does not file returns on your behalf.

Key automation features to require:

• Real-time rate calculation at checkout
• Automated return preparation and filing (AutoFile)
• Exemption certificate management
• Economic nexus monitoring and threshold alerts
• Product taxability database updates
• Audit trail and documentation storage

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Frequently Asked Questions

If I sell through Amazon FBA exclusively, do I still need to worry about sales tax?

Mostly not for Amazon sales — Amazon handles collection and remittance as a marketplace facilitator in all 45 states. However, FBA inventory in Amazon's fulfilment centres creates physical nexus in those states. If you ever sell through any other channel (your own website, Shopify, trade shows), you must collect sales tax in states where you have FBA nexus. Also, some states require you to disclose Amazon sales on your own returns even if Amazon handles the tax — verify state-specific rules.

Is my SaaS product taxable for sales tax purposes?

It depends entirely on the state. SaaS is taxable in Texas, Washington, New York, Pennsylvania, Massachusetts, Connecticut, West Virginia, and several others. SaaS is generally not taxable in California, Florida, Illinois, and Virginia. About half of states have not issued clear guidance and are in a grey zone. A taxability analysis for your specific product across your top 10–15 sales states is essential before you configure your billing system.

What happens if I collect sales tax but do not remit it to the state?

Collecting sales tax and not remitting it is considered theft of public funds in many states — it is treated more severely than simply not collecting. States can assess the full amount collected plus substantial penalties (up to 100% of the unremitted tax in some states) plus interest. Some states have criminal provisions for wilful failure to remit collected tax. Never collect sales tax without a remittance system in place.

How do I handle exempt sales (resellers, nonprofits, government)?

Exempt buyers (resellers purchasing for resale, nonprofits, government entities) provide exemption certificates that relieve you from collecting sales tax. Collect and retain exemption certificates for all exempt sales. Exemption certificate format varies by state — some accept the Streamlined Sales Tax Exemption Certificate; others require their own forms. Use a certificate management system (Avalara CertCapture, TaxJar) to collect, store, and track certificate expiration dates. Invalid or missing certificates make the sale taxable — and the audit burden falls on you.

Can I be audited for sales tax in multiple states simultaneously?

Yes. Some states coordinate audits or share information from audits in other states. A California audit that discovers you have been selling to residents of 15 states without registering could trigger referrals to all 15 states. Additionally, the MTC coordinates multi-state audits for large taxpayers. If your nexus exposure is significant, address it proactively through VDAs before a state initiates an audit — the cost of a proactive VDA is dramatically lower than an audit assessment.

How does my location affect the tax rate I charge?

US sales tax is destination-based in most states — the rate is based on where the customer receives the goods or services, not where you are located. For physical goods, the ship-to address determines the rate. For digital goods and services, state rules vary — some use the customer's billing address, others use the IP address, others use a "primary use" location. Use a real-time rate calculation tool to ensure you apply the correct rate — manually maintaining state + county + city + special district rates across 45 states is practically impossible.

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Next Steps

US sales tax compliance post-Wayfair is a significant obligation for any eCommerce business with meaningful multi-state sales. The combination of economic nexus thresholds, marketplace facilitator rules, product taxability complexity, and state-by-state filing requirements creates a compliance environment that requires systematic automation and expert support.

ECOSIRE's accounting team provides US sales tax compliance support — from nexus analysis and registration through ongoing return preparation, exemption certificate management, and VDA assistance for prior period exposure. We work with businesses across all industries and integrate with leading sales tax automation platforms.

Explore ECOSIRE Accounting Services to schedule a nexus analysis and sales tax compliance assessment for your business.