Economic Nexus Thresholds by State, and Why They Keep Shifting

By Finance Fundamentals Staff | Reviewed by Denise Okafor, CPA, State and Local Tax
Jurisdiction note: this article surveys sales tax economic nexus rules state by state across the United States. Requirements differ by state and change on independent timelines; nothing here applies uniformly to all fifty states.

Why Economic Nexus Rules Exist

A seller in Ohio who ships $99,000 worth of goods to Illinois customers this year owes Illinois nothing. Ship one more order that pushes the total past $100,000. The same seller then owes Illinois sales tax registration, collection, and remittance on every taxable sale going forward, starting with the order that tipped the scale.

That line, drawn at a specific dollar figure rather than a warehouse or an employee, is what “economic nexus” means.

Before Wayfair: A Physical-Presence Rule

Before June 21, 2018, the rule ran differently. The Supreme Court’s 1967 and 1992 precedents, National Bellas Hess and Quill Corp. v. North Dakota, required a seller to have physical presence in a state before that state could force it to collect sales tax. Catalog and early e-commerce companies built entire logistics strategies around staying physically absent from high-tax states.

After Wayfair: A Dollar Figure Replaces a Warehouse

South Dakota v. Wayfair, Inc. ended that arrangement. The Supreme Court ruled that South Dakota could require an out-of-state seller to collect its sales tax once the seller crossed $100,000 in sales, or completed 200 separate transactions, into the state in a year. No warehouse, office, or employee was required.

Within roughly two years, every state with a general sales tax had adopted some version of the same test. By the end of 2019, more than 40 states had done so; by 2021, the count covered every state that levies a general sales tax at all.

The thresholds states chose were not identical. Some copied South Dakota’s original dual $100,000-or-200-transaction design exactly. Others set one dollar figure with no transaction count at all. A few chose higher dollar amounts, on the reasoning that a small transaction count is a poor proxy for a large seller’s real footprint in the state.

Most states measure the threshold on a current-or-prior-calendar-year basis, then require registration within a set window after the threshold is crossed. That measurement detail matters almost as much as the dollar figure, because a seller can cross a threshold mid-quarter and still owe tax retroactively to the date of crossing in some states.

How the Threshold Tests Are Built

Every state’s economic nexus rule has three moving parts: a measurement period, a dollar figure, and, in some states, a transaction count. Getting any one of them wrong is enough to miss a filing deadline.

The measurement period is usually the current or immediately preceding calendar year, though a handful of states use a rolling twelve-month window instead. Sales counted toward the threshold typically include gross sales of tangible personal property and, in most states, taxable services and digital products delivered into the state.

Exempt sales for resale sometimes count toward the threshold even though they generate no tax themselves. That surprises sellers who assume only taxable revenue matters.

The dollar figure is the part most sellers track, and it ranges from $100,000 in the majority of states up to $500,000 in California and Texas. A smaller group of states, including Alabama and Mississippi, sits at $250,000.

The transaction count, where it still exists, is usually 200 separate sales in a year regardless of dollar value. A seller moving 250 low-cost units at two dollars each could trip a 200-transaction test in a state it never comes close to touching on the dollar side. That mismatch is exactly why several states have removed the transaction prong since 2021.

Two states, Connecticut and New York, require both tests to be satisfied at once rather than either one.

Local and home-rule taxes complicate the picture further in a few states. Colorado, Louisiana, and Alabama allow certain home-rule cities to administer their own sales tax separately from the state. That means a seller can clear the state’s economic nexus threshold and still need to register city by city for local collection.

Illinois runs a similar split: the state threshold applies to state tax, and a separate local threshold governs certain municipal and county rates. Sellers who register only at the state level in these states often discover the local piece months later, usually during a local audit rather than a routine filing.

State-by-State Threshold Reference Table

The table below shows a representative sample of state economic nexus thresholds, checked against state revenue department guidance and secondary compliance-industry trackers, current as of mid-2026. It is not a complete list of every state with a general sales tax, and figures change; verify the current rule directly with the state before relying on it for a filing decision.

Effective dates reflect the most recent published change to each state’s rule. Where a state has changed its threshold more than once, the table shows the current design rather than the full history.

Alaska, Delaware, Montana, New Hampshire, and Oregon have no general state sales tax and therefore no statewide economic nexus threshold.

Comparing State Thresholds at a Glance

Lining up seven of these dollar thresholds side by side shows how far apart the low end and the high end really sit. Every state on this chart except California and Texas caps out at $250,000 or below, and the dashed line marks the $100,000 point most states have converged around.

California and Texas sit five times higher than the $100,000 floor. That gap is a deliberate policy choice, not an oversight.

Where the Rules Are Heading

The Transaction-Count Test Is Disappearing

The clearest trend since 2021 is states quietly dropping the 200-transaction alternative and keeping only the dollar figure. Wisconsin removed it effective February 20, 2021. Louisiana followed on August 1, 2023. North Carolina followed on July 1, 2024. Utah followed on July 1, 2025. Illinois is scheduled to follow on January 1, 2026. Five states in under five years, and none has gone the other direction by adding a transaction count back.

The reasoning states give is consistent. A 200-transaction test catches small, low-dollar sellers, such as a handmade-goods shop selling eight-dollar phone cases, while doing almost nothing to catch large sellers whose transaction count would trip the threshold regardless of the rule.

Compliance analysts at firms including Avalara and Numeral have flagged the transaction count as the more error-prone half of the test. It can force small merchants into registration obligations that cost more to administer than the tax actually collected.

I think that argument holds up, and the states dropping the transaction count are making the more defensible call. A test built to catch large remote sellers should not also sweep in a hobbyist who ships 210 low-value orders a year. The dollar-only design matches Wayfair’s original intent better than South Dakota’s own dual test did.

Thresholds Are Converging Near $100,000

The second trend is softer but real: a rough convergence around $100,000 as the default dollar figure. Most states with a sales tax use that exact number today.

California, Texas, Alabama, and Mississippi are outliers on the high side, and no state has set a threshold below $100,000. If a legislature revisits its own threshold now, the pull toward $100,000 is strong, because it is the figure courts have already upheld and the figure most compliance software already assumes.

Not every state will converge. I would not bet on California or Texas lowering their $500,000 figure soon. Both have large enough in-state markets that a lower threshold would sweep in a large number of additional out-of-state sellers, and neither revenue department has shown appetite for that compliance workload.

Watch state legislative sessions each spring. Threshold changes cluster around new fiscal years, usually July 1 or January 1.

Marketplace facilitator laws changed the practical stakes of all this. Once a state requires Amazon, Etsy, or Walmart Marketplace to collect tax for every seller on that platform, a seller selling exclusively through marketplaces may never personally cross a threshold at all. The platform’s own registration covers those sales, not the seller’s.

The threshold question in this article matters most for sellers with a direct website, a wholesale channel, or sales spread across several platforms that do not aggregate reporting for them.

Economic nexus is a domestic problem with a close international cousin. Outside the United States, sellers face VAT on digital services registration thresholds that run on the same logic. A specific revenue figure crossed in a specific market triggers a new tax registration, just denominated in euros, pounds, or another local currency instead of dollars.

Economic nexus and cross-border VAT registration are the domestic and international mirror images of one underlying problem. Tax authorities are deciding how much unregistered economic activity in their market is too much, without requiring any physical footprint at all.

A Worked Example: Crossing Nexus in a New State

Consider a mid-size online furniture retailer based in Ohio with no employees, warehouses, or offices outside Ohio. It sells nationwide through its own website and one marketplace listing.

Through October of a given year, the retailer’s cumulative sales into Georgia reach $94,000 across 340 separate orders. In November, a $9,500 wholesale order to a Georgia design firm pushes cumulative Georgia sales to $103,500.

This example shows a mistake that trips up sellers who track only the dollar figure. Georgia offers either test, so the transaction count arrived first and created the obligation months before the dollar threshold did. A seller watching only a revenue dashboard would miss a registration deadline it did not know existed until an audit letter arrived.

Once nexus exists, the obligation typically continues into the following year regardless of whether sales fall back below the threshold. Several state guidance pages say this outright, and sellers miss it anyway. Deregistering usually requires an affirmative filing, not a quiet lapse.

Compare that to a seller approaching California. California requires $500,000 in sales with no transaction count at all, so a seller running 50,000 tiny transactions at nine dollars each stays well clear of nexus until cumulative revenue actually reaches the half-million mark. The same seller would have tripped Georgia’s transaction test 250 times over long before reaching a fraction of California’s dollar figure. Two states, two entirely different early-warning signals.

Common Mistakes Sellers Make

The same handful of errors show up across nearly every remote-seller audit. Five stand out.

1. Tracking gross sales dashboards instead of state-by-state breakdowns. A national revenue tool rarely slices sales by destination state automatically, so nexus can be crossed in a smaller state for months before anyone notices.
2. Ignoring marketplace-facilitated sales when they should count toward the threshold. Some states exclude marketplace sales from a seller’s own calculation because the marketplace already collects on them; others still count every sale. Assuming one rule applies everywhere causes both over-collection and under-collection.
3. Missing the transaction-count test because only revenue gets tracked. As the Georgia example shows, a state testing either dollars or transactions can trigger nexus through the count alone, well before the dollar figure arrives. That catches low-price, high-volume sellers, such as print-on-demand shops and accessory brands, especially often.
4. Assuming nexus ends the moment sales drop. Most states require continued registration through at least the end of the following year, plus an affirmative filing to deregister.
5. Registering everywhere at once out of caution. Registering before nexus actually exists creates ongoing filing obligations, including zero-dollar returns, in states where no tax is owed yet.

The fifth mistake surprises founders more than the rest. A registration filed too early does not sit quietly; it generates recurring deadlines, penalty exposure for missed zero returns, and, in a few states, minimum fees regardless of activity.

A Practical Monitoring Checklist

Sellers who stay ahead of economic nexus tend to run the same short routine every month rather than reacting once a year.

Key Takeaways

Frequently Asked Questions

What is economic nexus in simple terms?
Economic nexus is a state’s legal basis for requiring an out-of-state seller to collect and remit its sales tax once that seller’s sales into the state cross a set dollar amount or transaction count. No physical presence in the state is required.

When did economic nexus become legal?
The Supreme Court upheld the concept in South Dakota v. Wayfair, Inc. on June 21, 2018, and states began adopting their own versions within months of the ruling.

What is the most common threshold among states?
$100,000 in annual sales is the most common single figure, used by most states with a general sales tax as of mid-2026.

Do all states still use a transaction-count test?
No. Several states, including Wisconsin, Louisiana, North Carolina, and Utah, have removed their 200-transaction alternative since 2021, and Illinois is scheduled to drop its own on January 1, 2026.

Does nexus go away automatically once sales drop below the threshold?
Usually not right away. Most states require the seller to stay registered through the end of the following calendar year, and some require an affirmative filing to deregister.

Do marketplace sales count toward my own threshold?
It depends on the state. Some states exclude sales where a marketplace facilitator already collects tax; others include every sale regardless of who collected it. Check each state’s specific marketplace-facilitator guidance before assuming either answer.

Can a state require back tax once a threshold is crossed?
Some states start the obligation on the date the threshold is actually crossed within the measurement period, rather than only from the following month. A seller that notices the crossing late can owe tax on sales already made before registering. Confirm the exact effective-date rule with the specific state.

Which states have no economic nexus rule at all?
Alaska, Delaware, Montana, New Hampshire, and Oregon have no general state sales tax, so there is no statewide economic nexus threshold to cross, though Alaska allows local jurisdictions to set their own remote-seller rules.

References

• Supreme Court of the United States, South Dakota v. Wayfair, Inc., decided June 21, 2018.
• Texas Comptroller of Public Accounts, “Remote Sellers” guidance, comptroller.texas.gov/taxes/sales/remote-sellers.php, accessed 2026 (primary source).
• Sales Tax Institute, “What do I need to know about the Wayfair case and economic nexus?” FAQ, accessed 2026 (primary/legal-reference source).
• Avalara, “State-by-state guide to economic nexus laws,” accessed 2026 (secondary compliance-industry analysis).
• Numeral, “Economic Nexus: State-by-State Handbook for 2026,” accessed 2026 (secondary compliance-industry analysis).
• Congressional Research Service, “State Sales and Use Tax Nexus After South Dakota v. Wayfair,” Library of Congress, accessed 2026 (primary/legal-reference source).

Figures in this article were checked against the sources above as of mid-2026, and against primary state guidance where a link is cited directly in the text. State thresholds change periodically. A seller relying on any single figure here for a filing decision should re-verify it against the relevant state department of revenue first.