Sales Tax and Nexus for Retailers and Online Sellers
Learn when you have to collect sales tax in other states, how marketplaces change the picture, and how to stay compliant without drowning in filings.
When you sold from one storefront, sales tax was simple: collect your local rate, file with your state. Then you launched a website, listed on a marketplace, and started shipping to customers in 30 states. Now the question is where you owe, and it does not have an obvious answer.
The concept that decides it is nexus: a connection with a state strong enough that the state can require you to collect its sales tax. This lesson is education, not tax advice. Rules change often, so confirm with each state or a sales tax professional.
Physical nexus and economic nexus
Physical nexus comes from having a presence in a state: a store, an office, employees, or inventory. That last one surprises sellers who use third-party fulfillment, because inventory stored in a warehouse in another state can create nexus there.
Economic nexus arrived with the Supreme Court's 2018 decision in *South Dakota v. Wayfair*, which allowed states to require out-of-state sellers to collect based on sales volume alone. Every state with a statewide sales tax now has an economic nexus rule.
The transaction test is fading
Many states originally said you had nexus at $100,000 in sales OR 200 transactions. A growing list has dropped the transaction count. Indiana and Wyoming dropped it in 2024, Utah in July 2025, and Illinois as of January 1, 2026, leaving only a $100,000 sales test in those states. New York still requires both $500,000 in sales and more than 100 transactions. Thresholds and lookback periods vary, so check each state where you sell.
Alaska, Delaware, Montana, New Hampshire, and Oregon have no statewide sales tax, although some Alaska localities do. Every other state, plus many cities and counties within them, has its own rates and rules.
Marketplace facilitator rules
States now require large marketplaces (Amazon, Etsy, eBay, Walmart Marketplace, and others) to collect and remit sales tax on sales they facilitate. That takes a big compliance job off your plate, but not all of it.
- Some states count your marketplace sales toward your own nexus threshold, even though the marketplace collected the tax.
- Once you have nexus, you must collect on your direct sales (your website, wholesale orders, craft fairs) in that state.
- Some states still expect you to register or file even if all your sales there are through marketplaces.
Registering, collecting, and filing
- 1
Track sales by state
Pull a report from each channel each month showing gross sales and order count by ship-to state.
- 2
Watch thresholds
Note each state's threshold and measurement period (prior calendar year, current year, or rolling 12 months).
- 3
Register before you collect
Register with the state revenue department once you cross a threshold, before you start charging tax. Collecting without a permit can be its own violation.
- 4
Turn on collection
Configure your website platform to collect in that state at destination-based rates where required.
- 5
File on schedule
States assign monthly, quarterly, or annual filing. File even when you owe zero, since many states penalize missing zero returns.
Sales tax is not your money
Collected sales tax is held in trust for the state. Some owners park it in a separate account the day it comes in. Spending it on inventory and coming up short at filing time is one of the fastest ways to get into serious trouble with a state.
Exemption and resale certificates
When you sell wholesale to another retailer, they usually give you a resale certificate so you do not charge tax. Nonprofits, schools, and some manufacturers may provide exemption certificates. Keep a valid certificate on file for every untaxed sale. In an audit, a missing certificate typically means you owe the tax yourself. Likewise, use your own resale certificate when you buy inventory so you are not paying tax on goods you will resell.
Myth or fact? Tap to flip
Quick check
You sell $130,000 into Illinois in 2026 through your own website across 150 orders. What is the likely nexus situation?
Words to know
- Nexus
- A connection with a state that allows it to require you to collect its sales tax.
- Economic nexus
- Nexus created by sales volume into a state, without physical presence.
- Marketplace facilitator
- A platform required to collect and remit sales tax on sales it processes for third-party sellers.
- Resale certificate
- A document a buyer gives you showing goods are for resale, so no sales tax is charged.
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