In this article
Physical nexus
Physical nexus can come from an office, warehouse, employees, contractors, inventory, trade show activity, or other in-state presence. If your business has physical nexus, economic sales-volume thresholds may not matter — the obligation to collect generally exists regardless of revenue.
Online sellers often create physical nexus unintentionally by storing inventory in third-party warehouses or using fulfillment networks like Fulfillment by Amazon (FBA). Every state where inventory is held may constitute a physical-nexus state, even if the seller never visits that location.
Temporary activities can also trigger physical nexus in some states. Attending a trade show, sending a sales representative for a few days, or hiring a local contractor to install products may be enough. The duration and nature of the activity usually determine the outcome, and the rules differ by state.
Economic nexus thresholds by state
After the 2018 South Dakota v. Wayfair decision, most sales-tax states adopted economic nexus laws. South Dakota's own threshold is $100,000 in gross revenue or 200 transactions in the current or prior calendar year. Many states copied similar numbers, but the details vary significantly.
Texas sets its economic nexus threshold at $500,000 in total Texas revenue in the preceding 12-month period, with no transaction-count test. California also uses $500,000 in sales, measured over the current or prior calendar year. New York applies $500,000 in sales and more than 100 transactions — both conditions must generally be met.
Smaller states sometimes use lower thresholds. South Dakota's $100,000 or 200-transaction threshold is one of the most commonly referenced. Several states have since dropped the transaction-count prong and rely on dollar volume alone. Sellers should check each state's current rules, because legislatures may update thresholds between sessions.
Counting toward the threshold can be tricky. Some states include exempt sales, marketplace sales, or wholesale revenue in the count; others exclude them. Using the wrong counting method may cause a seller to register too late — or too early — in a given state.
Click-through nexus and affiliate nexus
Some states impose click-through nexus when an out-of-state seller pays a commission to an in-state person or website that refers customers via a link, and the seller's sales into that state exceed a dollar threshold — often $10,000. New York pioneered this approach, and several other states followed.
Affiliate nexus is a related concept. If an in-state affiliate actively solicits business on behalf of an out-of-state seller, the seller may be deemed to have nexus through the affiliate's activities. The distinction between passive advertising and active solicitation often determines whether affiliate nexus applies.
After Wayfair, economic nexus has largely overshadowed click-through and affiliate nexus for high-volume sellers, since the dollar thresholds for economic nexus are often lower. However, these rules may still matter for sellers whose revenue falls below economic-nexus thresholds but who have active affiliate or referral arrangements.
Sellers with affiliate programs should review each state where affiliates operate. A compliance strategy that accounts only for physical and economic nexus may overlook a click-through or affiliate nexus obligation in states with lower referral thresholds.
Marketplace collection
Marketplaces such as Amazon, Etsy, Walmart, or eBay may collect and remit tax on marketplace-facilitated sales under state marketplace facilitator laws. As of 2026, nearly every sales-tax state has a marketplace facilitator law in effect.
Keep marketplace-collected sales separate from direct-store sales in your records. This prevents double-counting and helps with filing decisions. In many states, marketplace sales may still count toward your economic-nexus threshold even though the marketplace remits the tax.
Marketplace facilitator laws generally do not remove a seller's obligation to collect tax on sales made through their own website or other non-marketplace channels. If you sell on both Amazon and your own Shopify store, you may still need to register and file in states where you have nexus for the direct-channel portion.
Frequently Asked Questions
Does every online seller need sales tax registration?
No. Registration depends on nexus, state thresholds, product taxability, and marketplace rules. Many small sellers fall below economic-nexus thresholds in most states.
Are nexus thresholds the same in every state?
No. Common thresholds include $100,000 or 200 transactions (SD model), $500,000 (TX, CA), and $500,000 plus 100 transactions (NY). Always check the current state-specific rule.
Do marketplace sales count toward my economic nexus threshold?
In many states, yes. Even though the marketplace collects and remits the tax, the seller's gross sales through that marketplace may still count toward the seller's own nexus calculation.
What is click-through nexus?
Click-through nexus may apply when an out-of-state seller pays commissions to in-state website owners who refer customers via links, and the seller's sales exceed a state-specific dollar threshold — often around $10,000.