Sales Tax Nexus Explained: When US E-Commerce Sellers Need to Register

Nexus, in one plain sentence

“Nexus” means a connection to a state strong enough that the state can require you to collect its sales tax. It used to require physical presence — an office, a warehouse, an employee. Since the Supreme Court’s Wayfair decision, economic activity alone is enough: sell past a state’s threshold, and you owe them registration and collection, whether or not you have ever set foot there.

For e-commerce sellers, this changed everything. Your obligations are no longer defined by where you are, but by where your customers are.

Economic thresholds — the common pattern

Most states set their threshold around $100,000 in annual sales into the state, and several also use a transaction-count test in the low hundreds of orders; a few larger states set higher dollar thresholds. The details differ state by state and evolve, which is precisely why this needs monitoring rather than memorising.

The practical takeaway: a growing seller crosses thresholds silently. Nothing announces it. The obligation begins anyway — and states can look back at uncollected tax you should have charged, which comes out of your margin, not your customer’s pocket.

Marketplace facilitators — the partial relief

If you sell through Amazon, Etsy, eBay or Walmart, marketplace facilitator laws now require the platform to collect and remit sales tax on those sales in essentially every state. That removes a huge burden — for marketplace sales.

But direct sales on your own Shopify or website remain your responsibility, and marketplace sales usually still count toward your economic threshold. Many sellers wrongly assume Amazon handling its share means they are fully covered. It does not.

Physical nexus still exists — and inventory counts

Inventory stored in a state generally creates physical nexus — which matters enormously for FBA sellers whose stock Amazon distributes across fulfilment centres in many states. Employees, contractors and offices likewise create presence the old-fashioned way.

Between economic thresholds and roaming inventory, a mid-size FBA seller can have obligations in a dozen or more states without ever consciously deciding to.

A sane way to manage this

The workable system has three parts: books that track sales by state accurately every month; threshold monitoring so registrations happen when required — not years late; and a filing calendar once registered, because registered-but-not-filing is worse than unregistered. Automation tools help with calculation; judgment and monitoring still need a human.

Our Sales Tax & VAT Compliance service does exactly this from books we already keep accurate. If you suspect you have crossed thresholds somewhere, the free file review is the low-drama way to find out where you actually stand.