The Highlights
- There are two main types of sales tax nexus: economic and physical.
- Some states can also impose other forms of nexus, such as affiliate and click-through.
- Sales tax nexus thresholds vary significantly from state to state.
- Marketplaces can simplify your sales tax obligations, but some states still require registration from sellers.
The sales tax nexus is pretty much the end-all, be-all for any ecommerce business interested in growing across state lines or simply expanding in their home state. Despite the intimidating moniker, nexuses aren’t that hard to decipher, and they can even help you grow your business faster if you become familiar with them.
Find out what a sales tax nexus is and which side of the line your business falls on with this RJM Tax Exemption blog.
How to Understand Sales Tax Nexus in the U.S.
Let’s start off with some sales tax nexus basics. There are essentially two main forms of sales tax nexus you need to know about as a seller: physical and economic. However, some states also have ‘other’ nexus forms, which we’ll cover as well.
Physical Nexus
A physical nexus is automatically triggered in a state if a business meets certain conditions, including:
- Maintaining satellite offices/employees/storing products in a state.
- Participating in trade shows (yes, temporary physical presence counts!)
- Third-party warehousing, such as through the Amazon FBA program.
If your business has established a physical nexus in a state, you’ll need to register, remit, and collect sales tax there. Understanding sales tax nexus in the U.S. is even more important in 2026 with hybrid work models creating unexpected obligations.
Economic Nexus
This type of nexus was more broadly fleshed out after the South Dakota v. Mayfair ruling in 2018, allowing a nexus to be established in a state solely by economic activity.
What is an economic sales tax nexus? This nexus can be triggered solely by sales volume and/or frequency, and the thresholds can vary state-by-state. For example, California’s economic nexus trigger is $500,000 in annual sales, while Colorado’s is $100,000 in annual sales.
Some states also impose transaction thresholds, such as 200 annual transactions. However, many states are moving away from this threshold, with Illinois recently switching exclusively to a sales-volume-based threshold.
Other Nexuses
Understanding sales tax nexus in the U.S. revolves primarily around physical and economic nexuses; however, other forms of obligations can also be created. Note that some states roll these scenarios in with their economic nexus laws.
For instance, 25 states have sales tax nexus threshold laws covering affiliate obligations. This nexus is established through connections with in-state entities or sales representatives in cases of shared ownership.
Similarly, a click-through nexus can be established through online referrals, commissions, and websites that drive sales through links.
Sales Tax Nexus and Marketplaces
If you’re running an ecommerce business, chances are you have some form of presence on a marketplace like Amazon or Etsy. Knowing how nexus laws interact with marketplaces is a key part of understanding sales tax nexus in the U.S.
If you don’t know what a sales tax nexus is and you’re selling exclusively through Amazon without a physical presence in some states, here’s the good news: you might not need to register for sales tax!
This is because most states have marketplace facilitator laws in place and exclude marketplace sales from the economic nexus, allowing platforms like Amazon to collect and remit taxes on your behalf.
The FBA Trap
The scenario we outlined above only really applies in cases where merchants sell digital goods in certain states. If you’re looking to understand sales tax nexus in the U.S., you should be aware of the FBA trap.
Merchants using the Amazon FBA program can have their goods distributed all across the country, which can trigger physical nexus. States like Connecticut require businesses to register for a sales tax permit in this scenario, even if they’re selling through a marketplace.
If you’re unsure about your obligations, it’s best to get a sales tax filing consultation from an expert.
Assessment is Compliance
Nexus assessment is the very core of compliance as far as ecommerce businesses are concerned. You need to conduct nexus reviews regularly to identify unexpected obligations and triggers now that you understand U.S. sales tax nexus.
Even if you know what your sales tax nexus is in a state, you need to watch for fluctuating trends year over year.
Certain businesses may be eligible for deregistration due to recent changes in sales tax nexus thresholds. Others may need to register promptly due to a newly established physical nexus.
Navigate Sales Tax with the Experts
If your ecommerce business has a potential nexus in multiple states, you could benefit from an expert assessment that streamlines your tax obligations and simplifies your growth trajectory. RJM Tax Exemption is a leading tax consultancy that helps businesses with affordable, customized tax solutions. Get started today with a free consultation!
Need more help understanding sales tax nexus in the U.S.? Reach out to speak to an expert, and we’ll sort out all your doubts right away.
Frequently Asked Questions
Can I have a sales tax nexus without a physical presence?
Yes. Reaching common thresholds like $100,000 in annual sales or 200 annual transactions can trigger an economic nexus in certain states.
How do I determine if my business has a sales tax nexus in a state?
The best way to do this on your own is to monitor sales data quarterly, paying special attention to locations where you might have stored physical inventory and state-by-state thresholds. If you’re not sure how to understand sales tax nexus in the U.S., speak to a tax expert right away.
How can I stay compliant with tax nexus rules?
Constant assessment and reviews are key. If you know what a sales tax nexus is, you’re aware that they can change year-over-year require vigilance. Maintain detailed records for audits and keep permits if you’re applying for exemptions.
