Intermediate Quick Answer
Why do some states have different economic nexus thresholds than others?
⚡ TL;DR
There is no federal standard — each state legislature set its own threshold. The $100,000 norm spread because South Dakota's threshold was the one the Supreme Court validated in 2018, and other states copied it for legal safety. California, Texas, and New York chose $500,000 to avoid burdening smaller sellers in large markets.
Because there’s no federal standard. Each state legislature chose its own number. The $100K norm spread because South Dakota’s threshold was the one validated by the Supreme Court, but states with larger economies or different policy goals set higher bars.
Key takeaways
- The US has no federal economic nexus standard: each state sets its own threshold through legislation
- $100,000 became the de facto standard because South Dakota’s law (using that number) was the one upheld in Wayfair (2018); other states copied it for legal safety
- California, Texas, and New York chose $500,000 reflecting their larger economies and a policy choice to not burden small sellers with negligible sales into their large markets
- Alabama and Mississippi enacted their rules early (pre-Wayfair clarity) at $250,000 as a more cautious initial threshold; neither has reduced it to $100K since
- New York’s AND condition (both $500K and 100 transactions) is the most seller-favorable major threshold, it requires high volume and high frequency to trigger
- States can change their thresholds through legislation at any time; monitoring state law changes is part of ongoing compliance for large nexus footprints
Frequently asked questions
Why do some states use $500,000 instead of $100,000?
California, Texas, and New York chose higher thresholds to reduce compliance burden on smaller sellers who have incidental sales into large markets. A seller with $150,000 in Texas sales is reaching a meaningful number of Texas consumers, but these states drew the line higher to reflect the scale of their economies and reduce the administrative burden on smaller remote sellers.
Is the $100,000 threshold required by federal law?
No. There is no federal law mandating any specific threshold. The $100,000 figure originated with South Dakota's 2016 nexus law, which the Supreme Court upheld in Wayfair (2018). Other states then adopted the same number because it had been validated, but they were not required to. Each state set its threshold through its own legislative process.
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