Sales Tax
Sales Tax Nexus: When You Owe Tax in Another State
Short answer
Nexus is the connection between your business and a state that creates a tax obligation. Physical nexus = office, employees, inventory, or jobs in-state. Economic nexus = crossing the state's sales threshold (typically $100k or 200 transactions per year).
Before 2018, you only owed sales tax in states where you had a physical presence. After the Supreme Court's Wayfair decision, states can also require you to collect based on sales volume alone. For service businesses doing jobs in multiple states, this matters.
Physical nexus triggers
- Office, warehouse, or storefront in the state
- Employees, contractors, or sales reps working in the state
- Inventory stored in the state (including FBA or 3PL)
- Performing jobs on-site (HVAC, contracting, repair)
- Attending trade shows beyond a few days
Economic nexus thresholds
Most states adopted a $100,000 in sales OR 200 transactions threshold. Some are higher (California, Texas: $500k). California and a few others dropped the transaction count and use revenue only.
Thresholds are usually measured on a rolling 12-month or prior-calendar-year basis. Cross the line and you have ~30–60 days to register.
Practical example
A Texas HVAC company does residential jobs only in Texas — single-state nexus, simple. The same company starts doing commercial installs in Oklahoma, hires a salesperson there, and crosses $150k in OK revenue. They now have nexus in OK and must register, collect, and remit Oklahoma sales tax.
Frequently asked questions
Does selling on Stripe or PayPal create nexus?
No. Marketplace facilitator laws make platforms like Amazon and eBay responsible, but direct payment processors do not create nexus by themselves.
How do I monitor nexus across states?
Track sales by ship-to state monthly. Tools like TaxJar and Avalara automate this. For a small business, a spreadsheet is fine until you near a threshold.
Tax-ready records, automatically.
Glo Invoice tags every expense and 1099 contractor so tax time is a download, not a scramble.
Sources & further reading
Primary sources we consulted when writing and reviewing this guide.