Economic Nexus Defined
Ecommerce sales tax is a BEAST. A beast with a mean growl, sharp claws, and putrid breath…yeah, it’s scary. Facing the beast of ecommerce sales tax is so challenging that many small- to medium-sized businesses run or hide (we don’t blame you). Avoiding sales tax can threaten business survival and success. One of the most difficult aspects of ecommerce sales tax to understand is economic nexus by state. Once you understand economic nexus, you are well on your way to overcoming the beast.
Previous to the South Dakota v. Wayfair ruling (June 2018), states were only able to tax ecommerce businesses based on old nexus laws (and a few less common laws). Old nexus laws required businesses to remit sales tax to states in which they had “physical presence”. Physical presence could be in the form of locations, employees, warehouses, etc. An easy way to think of it is people & property. If you have people (employees, contractors, traveling salespeople, etc.) or property (warehouses, buildings, inventory, etc.) in a state, you have physical presence there.
You are still required to collect and remit sales tax based on old nexus laws. But because of the South Dakota v. Wayfair ruling, states can also tax businesses based on “economic activity”. Economic activity refers to the amount of annual revenue and/or transactions that a business has within a state. When you reach a certain threshold of sales and/or transactions within a state, your business is said to have economic nexus. You are then required to collect and remit sales tax to that state.
Economic Nexus by State
Each state sets their own laws on economic nexus thresholds. For example, South Dakota expects sales tax to be collected by your business when you have annual sales in their state of more than $100K OR more than 200 annual transactions. California expects you to collect when you pass $500K in annual sales, but doesn’t specific how many transactions.
Not all states have economic nexus laws. Those that do have differing thresholds, which makes ecommerce sales tax really fun. To see where you might have economic nexus, check our map (above) for states with economic nexus laws. Does your business have significant sales volumes in any of these states? If so, refer to our table (below) for thresholds and other important info in those states.
This is a great starting point for navigating the world of ecommerce sales tax and especially economic nexus.
Important Note: This post is for informational purposes. Laws continue to change, and laws other than economic nexus may also require you to pay sales tax, including old nexus laws, click-through nexus laws, and affiliate nexus laws. Always contact the state if any questions remain.
Table updated January 1, 2023
|State||Threshold||Registration Deadline||Effective Date|
|Alabama||$250K||By Jan 1st following the year threshold is crossed||10/01/18|
|Alaska||$100K OR 200 transactions||No state-wide sales tax, but many local governments levy taxes. Register within 30 days of a local tax code being adopted OR after threshold is crossed.||Varies by district|
|Arizona||$100K||By 1st day of the month that starts 30 days after threshold is crossed||10/01/19|
|Arkansas||$100K OR 200 transactions||By the next transaction||07/01/19|
|California||$500K||The day threshold is crossed – AGGRESSIVELY ENFORCING||04/01/19|
|Colorado||$100K||By 1st day of the month that starts 90 days after threshold is crossed||12/01/18|
|Connecticut||$100K AND 200 transactions||By Oct 1st of the year in which threshold is crossed by Sept 30th – AGGRESSIVELY ENFORCING||12/01/18|
|District of Columbia||$100K OR 200 transactions||By the next transaction||01/01/19|
|Florida||$100K||By the next transaction||07/01/21|
|Georgia||$100K OR 200 transactions||By the next transaction||01/01/19|
|Hawaii||$100K OR 200 transactions||By the 1st day of the month after threshold is crossed||07/01/18|
|Idaho||$100K||By the next transaction||06/01/18|
|Illinois||$100K OR 200 transactions||By the 1st day of the next quarter after threshold is crossed||10/01/18|
|Indiana||$100K OR 200 transactions||Immediately upon threshold is crossed||10/01/18|
|Iowa||$100K||By the 1st day of the month starting at least 30 days after threshold is crossed||01/01/19|
|Kansas||$100K||By the next transaction||07/01/21|
|Kentucky||$100K OR 200 transactions||By 1st day of the month starting at most 60 days after threshold is crossed||10/01/18|
|Louisiana||$100K OR 200 transactions||Within 30 days of threshold is crossed. Begin collecting within 60 days.||07/01/20|
|Maine||$100K||By the next transaction – AGGRESSIVELY ENFORCING||07/01/18|
|Maryland||$100K OR 200 transactions||By 1st day of the month after threshold is crossed||10/01/18|
|Massachusetts||$100K||If threshold crossed by Oct 31st, register by Jan 1st of following year.||10/01/19|
|Michigan||$100K OR 200 transactions||By Jan 1st of the year following when the threshold is crossed||10/01/18|
|Minnesota||$100K OR 200 transactions||Within 60 days after threshold is crossed||10/01/19|
|Mississippi||$250K+||By the next transaction||09/01/18|
|Missouri||$100K||Within 3 months after the quarter in which threshold is crossed||01/01/23|
|Nebraska||$100K||By the 1st day of the 2nd month after threshold is crossed||04/01/19|
|Nevada||$100K OR 200 transactions||By 1st day of the month 30 days after threshold is crossed||11/01/18|
|New Jersey||$100K OR 200 transactions||By the next transaction||11/01/18|
|New Mexico||$100K||By Jan 1st of the year following when the threshold is crossed||07/01/19|
|New York||$500K AND 200 transactions||Within 30 days after threshold is crossed and begin to collect 20 days after that||06/21/18|
|North Carolina||$100K OR 200 transactions||By the next transaction||11/01/18|
|North Dakota||$100K||By the following calendar year or 60 days after crossing the threshold, whichever is earlier – AGGRESSIVELY ENFORCING||10/01/18|
|Ohio||$100K OR 200 transactions||By the next transaction||08/01/19|
|Oklahoma||$100K||By the 1st day of the month after threshold is crossed||11/01/19|
|Pennsylvania||$100K||By April 1st If threshold is crossed in previous year||07/01/19|
|Rhode Island||$100K OR 200 transactions||By Jan 1st of the year following when the threshold is crossed||07/01/19|
|South Carolina||$100K||By the 1st day of the 2nd month after threshold is crossed||11/01/18|
|South Dakota||$100K OR 200 transactions||By the next transaction||11/01/18|
|Tennessee||$100K||By the 1st day of the 3rd month after threshold is crossed||10/01/19|
|Texas||$500K||By the 1st day of the 4th month after threshold is crossed||10/01/19|
|Utah||$100K OR 200 transactions||By the next transaction||01/01/19|
|Vermont||$100K OR 200 transactions||By the 1st day of the month after 30 days from end of the quarter threshold is crossed||07/01/18|
|Virginia||$100K OR 200 transactions||By the next transaction||07/01/19|
|Washington||$100K||By the 1st day of the month that starts at least 30 days after threshold is crossed||10/01/18|
|West Virginia||$100K OR 200 transactions||By the next transaction||01/01/19|
|Wisconsin||$100K||By the next transaction||10/01/18|
|Wyoming||$100K OR 200 transactions||By the next transaction||02/01/19|
How to Determine Nexus
Now that you know what the economic thresholds are for each state, you need to go through your sales reports and determine where your sales determine that you have nexus. We explain some very simple ways to do that inside our Sales Tax Roadmap for Online Sellers course, as well as other important topics.
This course is a roadmap with everything you need to set your ecommerce business up for sales tax success.
Course content includes the following:
- Phases of sales tax “give-a-damn” – When do you need to care about it?
- Determining which states you need to worry about for sales tax – So THAT’S what nexus is about!
- How to get registered – Yes, it’s different in every state!
- How to configure your sales channels – Do this right to keep yourself out of trouble!
- When and how to file your returns – Send them all that money that AIN’T yours!
- How to CORRECTLY keep track of sales tax on your financial statements – Because sales tax is NOT income. Quit cookin’ the books, bruh!
Also, you’ll have access to our sales tax experts through our online community for continued support.
Sales tax compliance is a process, and we find that people and businesses are in different stages of the process. If you’d like to know where you are, consider taking our sales tax maturity assessment.
Doing a sales tax nexus study can be time-consuming. If you’d like to talk to us about doing it for you, contact us here.