Sales Tax Nexus

Sales tax nexus is a legal concept that determines whether your business has enough of a presence in a state to be required to collect sales tax there. If you have nexus in a state, you're legally obligated to collect sales tax from customers in that state and send it to the state's tax authority.

Traditionally, nexus was based on physical presence — a storefront, a warehouse, an employee, or even a sales rep traveling through the state. But after the landmark 2018 Supreme Court case South Dakota v. Wayfair, states can now establish "economic nexus" based on your sales volume alone. Most states set thresholds around $100,000 in sales or 200 transactions per year. Cross that line, and you've got nexus — regardless of whether you've ever set foot in the state.

This is where it gets complicated for small businesses selling online. If you're shipping products to customers in 30 states, you could have nexus in a dozen or more. Each state has its own tax rates, rules, and filing frequencies. Some tax clothing, others don't. Some tax digital goods, others don't. Managing multi-state sales tax compliance is genuinely one of the most complex parts of running a small business that sells across state lines.

If you have nexus in a state and aren't collecting sales tax, you're on the hook for all the uncollected tax — plus penalties and interest. States are increasingly aggressive about enforcement, especially after the Wayfair decision. An audit can go back years and result in five- or six-figure tax bills for businesses that didn't realize they had nexus. Even if you sell primarily online and have no physical presence outside your home state, your sales volume could trigger nexus in multiple states. Understanding where you have nexus isn't optional — it's a financial and legal necessity.