Sales tax nexus for online sellers: what it is and when it applies (2026)
Sales tax is the most confusing compliance area for online sellers — and getting it wrong can mean back-tax assessments, penalties, and interest. The good news: if you sell exclusively through major marketplaces, they handle sales tax for you in all 45 states that have it. The complexity kicks in if you sell through your own website. Here's exactly how it works.
What is sales tax nexus?
Sales tax nexus is the connection between your business and a state that requires you to collect and remit sales tax. Two types:
- Physical nexus: You have a home, office, warehouse, inventory (including Amazon FBA), employees, or even temporary craft fair presence in the state.
- Economic nexus: You exceed a threshold of sales revenue or transaction count in the state, without any physical presence. This affects most online sellers.
Economic nexus was established by the 2018 Supreme Court decision in South Dakota v. Wayfair, Inc.
The marketplace facilitator rule
All 45 states with a sales tax (plus DC) have marketplace facilitator laws requiring the platform — not the seller — to collect, report, and remit sales tax on marketplace transactions. Etsy, Amazon, eBay, Poshmark, Mercari, Depop, Facebook Marketplace, and TikTok Shop all handle this for you.
Get the sales tax nexus state-by-state cheat sheet (PDF)
Every state's economic nexus threshold, marketplace facilitator status, and registration links — in one reference document.
Economic nexus thresholds
Most states use $100,000 in gross sales as the trigger. The trend in 2026 is toward revenue-only thresholds — Illinois eliminated its 200-transaction rule effective January 1, 2026.
| Threshold type | States | Common amount |
|---|---|---|
| Revenue only | Most states (growing) | $100,000/year |
| Revenue OR transactions | Several states | $100,000 OR 200 transactions |
| Revenue AND transactions | Connecticut, New York | $100K–$500K AND 100–200 transactions |
| Higher revenue | CA, NY, TX | $500,000/year |
States with no sales tax
Alaska (no state tax, some local), Delaware, Montana, New Hampshire, Oregon.
The Shopify seller problem
If you sell through your own Shopify store, you are the merchant of record. You must determine nexus, register for permits, configure tax collection, and file returns yourself. TaxJar ($99–$499/month) and Avalara automate this — for sellers with nexus in 3+ states, the cost is justified by the compliance burden.
What to do if you have nexus
- Register for a sales tax permit in each nexus state (most offer free online registration).
- Configure tax collection in your platform.
- File returns on schedule — even $0 returns when required.
- Keep records of sales by state, tax collected, and tax remitted.
Sales tax vs. income tax
Sales tax is collected from the buyer and passed to the state. Income tax is your tax on profit. A marketplace handling sales tax does not mean your income taxes are handled. See our 1099-K guide for income tax details.
Common sales tax mistakes
- Assuming the marketplace handles everything. Only for marketplace sales — not your own site, fairs, or wholesale.
- Not registering in your home state. Most states require a permit for any business selling taxable goods.
- Ignoring FBA warehouse nexus. Amazon storing your inventory in a state can create physical nexus there.
- Not filing $0 returns. Once registered, returns are required even in periods with no sales.