Sell to customers in other US states and you may owe sales tax there even if you never set foot in them. This guide explains sales tax nexus for small sellers and freelancers: what creates it, the economic nexus thresholds state by state, how marketplace facilitator laws change the picture, and exactly what to do when you cross a threshold.
What Is Sales Tax Nexus?
Sales tax nexus is the legal connection between your business and a state that gives that state the right to require you to collect and remit sales tax on sales made to customers there. Before 2018, nexus generally required a physical presence, like an office, warehouse, employee, or contractor in the state. That changed with the US Supreme Court’s 2018 decision in South Dakota v. Wayfair, which ruled that a state could require an out-of-state seller to collect sales tax based on economic activity alone, with no physical presence at all.
Today every state with a statewide sales tax has an economic nexus law. In practice this means your obligation depends on two separate questions: first, do you have nexus in a particular state, and second, is what you sell actually taxable in that state? You need a yes to both before you must collect.
What Are the 4 Types of Sales Tax Nexus?
Economic nexus gets the headlines, but it is not the only way a state can claim you. Understanding all four types matters because each one can independently trigger registration.
Economic nexus. Created by your sales volume into a state: dollar thresholds, transaction counts, or both. This is the most common trigger for online sellers and remote freelancers.
Physical nexus. Created by a real footprint: an office, a warehouse, an employee, or a contractor working in the state. Even attending a trade show booth can create physical nexus in some states.
Inventory nexus. A subset of physical nexus that trips up many small sellers. If you store inventory in a third-party fulfillment warehouse, you have nexus in every state where that inventory sits. Amazon FBA sellers should take note: every state where Amazon stores your inventory is a nexus state for you, and Amazon’s network shifts inventory around without asking.
Click-through and affiliate nexus. Created by referral relationships. If affiliates, influencers, or referral partners in a state drive sales to your site above certain levels, some states treat that as nexus.
Watch out: crossing a threshold creates an obligation even if you only discovered it later. States can assess back taxes, penalties, and interest for periods you were not registered. If you find you crossed a threshold months ago, most states offer Voluntary Disclosure Agreements (VDAs) that cap the lookback period at 3-4 years instead of leaving it unlimited.
What Are the Economic Nexus Thresholds by State?
There is no single national threshold. Each state sets its own, and they differ in whether they count dollars, transactions, or both. Roughly two-thirds of sales-tax states follow the South Dakota model the Supreme Court upheld: $100,000 in gross sales OR 200 separate transactions into the state per calendar year. Here are the thresholds most likely to matter to small sellers and freelancers.
| State | Sales threshold | Transaction threshold | Notes |
|---|---|---|---|
| California | $500,000 | None | Highest threshold in the country |
| Texas | $500,000 | None | Gross receipts basis |
| New York | $500,000 | More than 100 | Both conditions must be met |
| Florida | $100,000 | None | Transaction threshold eliminated |
| Illinois | $100,000 | None | 200-transaction threshold removed Jan 1, 2026 |
| Pennsylvania | $100,000 | None | Gross sales into the state |
| Washington | $100,000 | None | Also taxes digital automated services broadly |
| Colorado | $100,000 | None | Home-rule cities add extra filing complexity |
| Tennessee | $100,000 | None | One of the highest combined state+local rates |
| Ohio | $100,000 | 200 | Either triggers nexus |
Which five states have no statewide sales tax at all? New Hampshire, Oregon, Montana, Alaska, and Delaware, often called the NOMAD states. Note that some Alaska local jurisdictions impose their own remote-seller rules, so “no state tax” does not always mean “no tax.”
Rates last reviewed: October 2026. Thresholds change, so confirm the current figure with each state’s department of revenue before you register or conclude you are below the line.
How Do Marketplace Facilitator Laws Affect Small Sellers?
Marketplace facilitator laws are the single biggest simplification in US sales tax. All 45 states with a statewide sales tax, plus Washington, D.C., have them. The law makes the marketplace, not you, responsible for collecting and remitting sales tax on orders placed through its platform.
In practice: if you sell through Etsy, Amazon, eBay, Walmart Marketplace, or TikTok Shop, the platform calculates, collects, and remits the sales tax for orders shipped to buyers in facilitator states. It comes out of the transaction automatically, and you do not need to register, file, or remit on those sales.
There are three catches worth knowing. First, your own direct sales are still your responsibility. Orders through your own Shopify or BigCartel storefront are not marketplace-facilitated and count toward your economic nexus thresholds. Second, facilitator sales may still count toward some states’ nexus thresholds for registration purposes, so check the state’s rules. Third, you still need records: gross sales, fees, refunds, and the tax the marketplace collected, so your books reconcile at filing time.
Tip: if most of your revenue flows through Etsy or Amazon, you may have no registration obligation anywhere. Download each platform’s sales tax reports quarterly and keep them. If you later expand to direct sales, you already have a clean baseline.
Does Selling Services or Digital Products Create Nexus?
This is where freelancers get confused, because the answer has two parts. First, your economic activity still counts: selling services or digital products into a state can push you over that state’s dollar or transaction threshold just like selling physical goods. Second, services are taxable in some states and exempt in others, and the rules vary product by product.
As a rule of thumb: most states exempt pure professional services such as consulting, writing, and design. But the picture changes with digital delivery. Software delivered electronically is taxable in roughly 34 states, and software-as-a-service is taxable in a growing number, with states like Maine and Washington expanding digital-services taxation as recently as 2026. In Texas, digital products are taxable but many services are exempt; in New York, some digital products are taxable while many services are exempt. California taxes tangible property but generally not services.
For freelancers, the practical test for each state where you have customers is: (1) did I cross the nexus threshold, and (2) is my specific deliverable taxable there? If a website developer in Ohio sells $120,000 of downloadable template files to Ohio buyers, they likely have nexus and owe tax on those downloads. If the same developer sells only hourly maintenance services to Ohio clients, the services are likely exempt even with nexus, so the registration question matters less.
Use LancerBill’s sales tax calculator to see exactly how much tax applies once you know your nexus states and rates.
Worked Example: When a Small Seller Crosses the Line
Let’s make this concrete. Maya runs a one-woman print shop from her home in Arizona. She sells art prints through three channels: her own Shopify store, Etsy, and a wholesale arrangement. Her calendar-year sales into California break down like this:
| Channel | California sales | California transactions | Who collects tax? |
|---|---|---|---|
| Etsy | $180,000 | 1,400 | Etsy (marketplace facilitator) |
| Own Shopify store | $95,000 | 760 | Maya |
| Wholesale (for resale) | $60,000 | 24 | Nobody (resale, with certificate) |
Step 1: does Maya have California nexus? California’s threshold is $500,000 in sales with no transaction count. Her total California sales are $180,000 + $95,000 + $60,000 = $335,000. That is below $500,000, so no economic nexus on the dollar test. Her Etsy sales are facilitator-handled regardless.
Step 2: what changes if California were a $100,000 state? Many states use $100,000. There, Maya’s $335,000 in gross sales would clear the threshold. Note that most states count gross sales including facilitator and wholesale sales when measuring the threshold, even though tax collection differs by channel.
Step 3: what would she owe? Suppose Maya crosses a $100,000 threshold in a state with an average combined rate of 8%. On her $95,000 of direct sales, the uncollected tax is $95,000 x 0.08 = $7,600 per year, plus penalties and interest if she should have registered earlier. That is the real cost of missing a threshold: not the rate, but the registration you never did.
Run your own numbers with a business pricing calculator to see how absorbed tax costs affect your margins, and check our break-even analysis guide to understand how compliance costs change your break-even point.
What Should You Do When You Cross a Threshold?
Crossing a threshold is an administrative event, not a crisis, as long as you act promptly. Work through these steps in order.
1. Confirm the threshold and the measurement period. Most states measure the calendar year or the preceding twelve months, and count gross sales including exempt sales. Wholesale for resale usually counts toward the threshold even though it is not taxable, because the threshold measures activity, not tax due.
2. Register for a sales tax permit before you collect. Registering is free in most states and done through the state’s department of revenue website. Do not collect tax without a permit; in several states collecting without registration is itself a violation.
3. Start collecting on the correct date. States differ: some require collection on the first day of the month after you cross, others on the next transaction. Mark the exact date your records show you crossed.
4. Set your filing frequency. The state assigns monthly, quarterly, or annual filing based on your tax liability. Calendar the due dates immediately, because late filing draws penalties even in months you owe nothing.
5. File zero returns when required. Many states require a return every period once registered, even with zero taxable sales. A missing zero return can trigger the same penalty as a missing payment.
6. Keep exemption certificates. Every wholesale or exempt sale needs documentation: resale certificates, exemption certificates, and invoices that separately state exempt items. If you are audited, the certificate is what protects you.
A useful rule of thumb: review your sales by state every quarter. A simple spreadsheet of revenue and transaction counts per state takes an hour and catches threshold crossings before they become back-tax problems.
Common Nexus Mistakes Small Sellers Make
The errors that cost small businesses the most are not exotic. They are ordinary oversights repeated for years.
Assuming “online” means “no sales tax.” Since Wayfair, physical presence is optional. Economic activity alone creates the obligation.
Treating facilitator sales as someone else’s problem entirely. The marketplace handles collection, but your facilitator-channel sales often still count toward your own nexus thresholds, and you still owe accurate records.
Ignoring the FBA inventory trap. Sellers who use Amazon’s fulfillment network gain physical nexus in every state where Amazon stores their goods, often without realizing it. Check where your inventory sits, not just where you ship from.
Collecting tax without registering. Some sellers start adding tax at checkout “to be safe.” In several states, collecting sales tax without a permit is a separate violation with its own penalties.
Forgetting that services and digital products have their own rules. Freelancers who sell templates, presets, courses, or SaaS-style access can create nexus and taxability that pure service providers never face. Check the taxability of each deliverable, not just the threshold.
Letting a missed threshold age. The longer an unregistered period runs, the larger the assessment. If you discover an old crossing, talk to a tax professional about a Voluntary Disclosure Agreement before the state finds you.
Key takeaways
- Since South Dakota v. Wayfair (2018), sales volume alone can create sales tax nexus, no office or warehouse required.
- Most states use $100,000 in sales or 200 transactions as the trigger; California, Texas, and New York use $500,000, and five NOMAD states have no statewide sales tax.
- Marketplace facilitator laws mean Etsy, Amazon, and eBay collect tax for you on platform sales; your direct storefront sales remain your responsibility.
- Nexus and taxability are two separate questions: you can have nexus in a state where your services are exempt, or sell taxable products below every threshold.
- Review sales by state quarterly, register before collecting, file zero returns when required, and use a VDA if you discover a late crossing.
FAQs
Do I need to register for sales tax in every state I ship to?
No. You only register in states where you have nexus, meaning physical presence or economic activity above that state’s published threshold. For most small sellers who sell mainly through Etsy, Amazon, or eBay, the marketplace facilitator laws mean the platform handles collection and you typically do not need to register anywhere for those sales.
Do marketplace sales count toward my nexus threshold?
In most states, yes. Thresholds usually measure your gross sales into the state, including sales the marketplace collected tax on and wholesale sales for resale. The threshold measures your economic activity, not the tax you personally owe, so facilitator-channel sales still count in most states.
As a freelancer, do I need to charge sales tax on my services?
It depends on the state and the deliverable. Pure professional services like consulting, writing, and design are exempt in most states, but many states tax digital products, electronically delivered software, and SaaS. You still need nexus first, but freelancers selling templates, courses, or digital downloads should check taxability state by state. Related reading: GST rules for freelancers in India and UK VAT rules for freelancers.
What happens if I should have registered but didn’t?
The state can assess the uncollected tax plus penalties and interest for the unregistered periods. Most states offer Voluntary Disclosure Agreements (VDAs) that limit the lookback to 3-4 years and often waive penalties if you come forward before being contacted. Talk to a tax professional before applying.
Which states have no sales tax?
New Hampshire, Oregon, Montana, Alaska, and Delaware have no statewide sales tax, often called the NOMAD states. Be aware that some Alaska local jurisdictions impose their own sales taxes with remote-seller rules, so check local requirements too.
How often should I check my nexus exposure?
Quarterly. Export your sales by state from each channel, total the revenue and transaction counts, and compare against each state’s published threshold. It takes about an hour and catches crossings while they are still easy to fix. Build the tax cost into your pricing with an invoice generator that shows tax as a separate line item.
When a total already includes tax, for example on a receipt or a supplier bill, you need the reverse calculation instead. Our guide on how to calculate sales tax backwards shows the formula and the common mistake to avoid.
This guide is for general information only and is not financial, tax or legal advice.