Economic Nexus & the Wayfair Ruling

Can I lose economic nexus if my sales drop below the threshold?

Yes, but with a lag. If your sales drop below a state's threshold in the measurement period, you may be able to close your permit and stop collecting, but only after confirming the threshold hasn't been met in either the current or prior year, and completing the proper permit closure process.

Do marketplace sales count toward my nexus threshold?

In most states, yes — Amazon, Etsy, and other marketplace sales count toward your economic nexus threshold even though the marketplace collects the tax. Here's what to do about it.

Do transaction counts still matter for economic nexus thresholds?

Most states originally adopted a 200-transaction threshold alongside the $100K sales threshold. Many have since dropped the transaction count or raised it. It still matters in states that retained it, especially for sellers with low average order values.

Does economic nexus apply to B2B-only sellers, not just B2C?

Yes. Economic nexus thresholds apply to B2B sellers just as they do to B2C sellers. The threshold is based on gross sales into the state, not on whether buyers are businesses or consumers. B2B sellers must register once they cross the threshold, even if most sales are exempt via resale certificates.

Does economic nexus make physical presence rules irrelevant?

No. Physical nexus rules remain fully in effect. Physical presence creates nexus immediately with no sales threshold: a warehouse or FBA inventory in a state creates nexus from day one regardless of how much you've sold there.

How do I track economic nexus thresholds in real time across all my sales channels?

Tracking economic nexus thresholds across multiple sales channels requires aggregating state-level data from each platform. Here's the manual approach and when software monitoring pays for itself.

How is the nexus threshold calculated — calendar year or trailing 12 months?

Most states use a prior-year or current-year calendar year window, not a rolling 12 months. But several use a trailing 12-month lookback. Getting this wrong can delay collection obligations.

Is there a grace period between crossing an economic nexus threshold and when I must register?

There's no formal grace period in most states, but your collection obligation typically starts the first of the following month or quarter, not on the exact crossing date. That window is your practical runway to register.

What are the economic nexus thresholds by state?

Most states use $100,000 in annual sales as the economic nexus threshold. California uses $500,000. Texas uses $500,000. Here's the framework, the confirmed exceptions, and how to verify your specific state.

What do I do the moment I cross an economic nexus threshold in a state?

When you cross an economic nexus threshold, register immediately, determine your collection start date, configure your platform, and start collecting by that date. Here's the exact sequence.

What is economic nexus, and how does it differ from physical nexus?

Economic nexus is the obligation to collect sales tax based on your sales volume in a state, even without physical presence there. It exists in every state with a sales tax since the 2018 Wayfair ruling.

What is the most common economic nexus threshold?

$100,000 in sales OR 200 transactions is the most common economic nexus threshold, used by the majority of US states. It originated with South Dakota's 2016 law and was validated by the Supreme Court's 2018 Wayfair decision.

What is the Wayfair ruling, and what did it change for online sellers?

The 2018 Supreme Court ruling in South Dakota v. Wayfair eliminated the physical presence requirement for sales tax collection. States can now require remote sellers to collect once they cross a sales threshold.

When do I have to start collecting sales tax in another state?

You must collect sales tax in another state once you have nexus there, triggered by physical presence or crossing a $100K sales threshold. Here's exactly when your obligation starts.

When does economic nexus begin — the day I cross the threshold or the next period?

In most states, your collection obligation begins on the first day of the following month or quarter after you cross the threshold, not on the exact crossing date. But you need to register before that date arrives.

Which states have thresholds above or below $100K?

Three major states use a $500,000 threshold: California, Texas, and New York. Alabama and Mississippi use $250,000. No states currently use a threshold below $100,000. New York is unique in requiring both $500,000 AND 100 transactions simultaneously.

Why do some states have different economic nexus thresholds than others?

States set their own economic nexus thresholds because there is no federal standard: each state legislature chose its own number. California, Texas, and New York set higher thresholds to reduce burden on smaller sellers entering large markets. Alabama and Mississippi set theirs before Wayfair established the $100K norm.