The Highlights
- There are two types of sales tax nexus: physical and economic.
- Economic nexus thresholds vary by state, but are typically $100,000 in gross annual sales.
- Leverage exemptions and relief like the de minimis threshold and marketplace facilitator laws if you’re a small seller.
Understanding business sales tax permit deadlines and economic nexus threshold requirements is absolutely essential if you’re operating in the world of ecommerce and/or multi-state sales.
But when exactly do you need to register? Are there scenarios where you can sell online without registering for a permit? Get the answers you need to sell better right here with this RJM Tax Exemption blog.
What is a Sales Tax Nexus?
Before we discuss the scenarios where you need to register for sales tax, let’s go over the basics of the sales tax nexus.
A sales tax nexus is the connection between your business and a state that requires you to register, collect, and remit sales tax on sales made to customers in that state.
Simple enough, right?
Not quite. There are two main types of nexus.
Physical Nexus
A physical nexus is triggered by a business’s tangible presence in a state, such as:
- A physical warehouse or office
- Employees or contractors working in a state
- Inventory stored in a state (including Amazon FBA)
If any of these points apply to you, you likely need to register for sales tax. A physical presence in most states triggers immediate sales tax obligations, even if a business doesn’t cross the sales threshold.
Economic Nexus
Even if you’re unsure about business sales tax permit deadlines, you’ve probably heard of the term ‘economic nexus’. This nexus is triggered purely by sales volume in a state.
Key Economic Nexus Triggers
Most states set their economic nexus threshold at $100,000 in annual sales into the state (typically for the current year). Interestingly, some states have eliminated the old ‘200 transactions’ requirement when assessing nexus obligations, in an effort to simplify sales tax filing and overall compliance.
You may need to register for sales tax when you cross standard thresholds, like:
- $100,000 in gross sales
- $500,000 in gross sales in California, or $500,000 + 100 transactions in New York.
Economic nexus threshold requirements can vary wildly depending on the state in question, so you should always consult your state’s rules or speak with a tax expert before deciding on a plan of action.
When To Register: Quick Decision Table
| Scenario | (Likely) Need To Register? | Considerations |
| Physical presence (inventory storage, employees, etc.) | Yes | Immediate obligation |
| >100,000 in direct sales to a state without a physical presence | Yes | Triggers an economic nexus |
| Most sales are made through marketplace facilitators like Amazon or eBay | No (only for those sales) | You may still need to register for sales tax if your direct sales exceed a state’s economic nexus threshold |
| Direct sales to a state total less than $100,000 in a year | No | Likely exempt under the small seller de minimis threshold |
Key Exemption Thresholds and Relief for Small Sellers
If you’re a small seller conducting business through a marketplace facilitator or even through your own website, you might be able to benefit from built-in protections that delay or eliminate registration obligations. Look out for these exemptions before you start worrying about business sales tax permit deadlines!
De Minimis Thresholds
The reason you don’t need to register for sales tax in certain cases is that the economic nexus thresholds themselves serve as a de minimis rule. What does that mean?
If your gross sales into a state stay below a threshold (usually 100,00), you’re automatically exempt from any obligation to register, collect, or remit sales tax. Prior to the 2018 Wayfair decision, any physical presence in a state would constitute a nexus, even if a seller was below the $100,000 threshold.
Today, low-volume sellers can operate nationwide without tax burdens, provided they remain below per-state limits.
Is De Minimis Being Phased Out?
This is a common misconception that’s been cropping up, leading many sellers to wonder about economic nexus threshold requirements and whether they need to register for sales tax. We’ll address that here:
The domestic de minimis rule is here to stay and is not being phased out. The administration has, however, eliminated the de minimis exemption for imported goods from outside the U.S.
Other Exemptions and Relief
- Marketplace Facilitator Relief: Most states have enacted strong marketplace facilitator laws, requiring platforms like Amazon to collect and remit taxes on behalf of third-party sellers. If most of your sales are on such platforms, you may not have to worry about business sales tax permit deadlines.
Note that you may still need to register for sales tax when your direct sales (outside of the marketplace) trigger an economic nexus in a state. - B2B Sales Exclusions: Many states, like Alabama, Colorado, and Minnesota, exclude wholesale sales from economic nexus calculations. If you’re managing a B2B-centric operation in such a state, you might benefit from these exclusions.
Master Sales Tax with RJM
Navigating sales tax doesn’t have to be overwhelming. Work with RJM Tax Exemption, a top-rated tax consultancy, to simplify your sales tax obligations and sell hassle-free across the country with specialized tax planning. Get started today with a free consultation!
Frequently Asked Questions
When do I need to register for sales tax?
You need to sign up if you have a physical presence (such as employees or a warehouse) in a state, or if you trigger a state’s economic nexus (typically $100,000 in gross annual sales).
Do I need to collect sales tax in multiple states if I sell exclusively on Amazon?
In most cases, no. Most states have enacted marketplace facilitator laws, which put the onus for collecting and remitting sales tax on platforms like Amazon and Etsy.
What happens if some of my sales are direct and some are through marketplaces?
You only need to consider your direct sales when assessing your sales tax obligations. You’ll only need to register for sales tax if your direct sales exceed the economic nexus threshold in a state. Don’t forget to keep an eye out for those business sales tax permit deadlines!
