Sales Tax Nexus Threshold 2025

Did you know that in the first quarter of 2024, U.S. state and local governments collected approximately $513.72 billion in taxes?

As a business owner, you must be careful about sales tax nexus, especially if you’re in interstate commerce.

This nexus makes it mandatory for your business to collect and remit sales taxes on taxable sales within your state. You can establish this “nexus” or connection through various means, such as having a physical presence in that state, exceeding sales thresholds, conducting major business activities, and other ways.

So, familiarize yourself with 2020 nexus rules so you can avoid the fines/penalties & other legal repercussions that come when businesses don’t follow guidelines while operating across state lines.

What irks most businesses is the level of variations in how states calculate sales tax nexus thresholds. For example, some states also include marketplace sales, while others stick to physical and economic sales.

Similarly, the very definition of “taxable sales” can vary from state to state; some states count gross sales, but others don’t.

It means that you have to be careful about state-specific nexus thresholds in the modern world of business. You must track your business activities across different jurisdictions to stay compliant.

Worried that the sales tax calculations are too risky and time-consuming? You should switch to automation tools like TaxCloud to monitor nexus laws across different states.

This software makes it easier to track your company’s sales activity and get alerts when you’re approaching the threshold. This way, you won’t get bogged down by regulatory quagmires.

Try using TaxCloud’s free 30-day trial to see if this software is what you need to excel in the ever-evolving business sphere. Let’s explore the sales tax nexus in more detail.

Understand economic nexus laws and how remote seller sales tax works in places in West Virginia, Delaware, Wisconsin, Maryland, Minnesota, and other states.

What Is Sales Tax Nexus?

A survey claims that almost 6,400 US-based firms migrated across state borders. Many firms operate in different states at the same time. A lot of businesses don’t physically exist across state lines but engage in economic activities in all parts of the United States.

That’s why learning the importance of sales tax compliance nexus is so important for business owners.

This “nexus” outlines the connection between your business entity and the state. It describes your company’s obligation to collect and remit sales taxes on the sales made within the state. So, you should be aware of your nexus (physical/economic) and how it affects you.

Do you own a warehouse in a certain state? Do you have offices in multiple states? Do you have employees across state lines? Understanding it all is essential for business operations.

How Nexus Determines Tax Obligations?

Nexus determines if the state requires your business to collect sales tax or not. If your business ends up establishing a sales tax nexus, you’ll have to register with the state’s tax authority and begin collecting sales tax from customers.

The criteria for establishing nexus vary from state to state. It falls into two general categories:

Physical Nexus

You establish this nexus when your business has a tangible presence in that state. For instance, owning offices, storefronts, warehouses, factories, etc. (or even holding trade shows or business conferences) will create this nexus.

Economic Nexus

This one’s a little complicated (so we’ll explain it in detail later on). Basically, this nexus emerged from the 2018 Supreme Court ruling in South Dakota vs. Wayfair. This nexus allows the state to ask out-of-state sellers to collect sales taxes if their sales exceed a certain threshold. It depends on two things:

• Total business revenue (e.g., $100k)
• Number of transactions (e.g., 200k transactions)

Don’t worry; we’ll explain these two nexus types (and a third one) in detail in the next section.

Types of Sales Tax Nexus

Physical Nexus 2025

You establish this nexus when your business has a tangible presence in a state (as mentioned before). It’s the most common type of sales tax compliance nexus for US-based companies. It works when your business has a physical location, employees, inventory, or trade shows in a certain state.

Each state has its own rules regarding what constitutes a physical nexus. So, your businesses must evaluate their activities carefully to determine their obligations.

Economic Nexus 2025

This economic nexus is relatively new; it emerged as a result of 2018 with the landmark South Dakota vs. Wayfair decision. It assumes that your economic activity also establishes a link between your business and your state.

Background: South Dakota v. Wayfair 2018

The Supreme Court decided this case on June 21, 2018. It overturned the long-standing physical presence requirements in previous cases. For instance, National Bellas Hess, Inc. v. Department of Revenue of Illinois (1967) and Quill Corp. v. North Dakota (1992) were overturned.

Basically, South Dakota had enacted a law that required out-of-state sellers to remit sales tax if they were making over $100k in sales or conducting 200+ transactions in the Coyote State within a 12-month period.

Wayfair took the state to the Supreme Court over this ruling, where the state argued that the traditional physical presence standards had become irrelevant because of the rise of eCommerce, necessitating the levying of sales taxes upon remote sellers. Now, these marketplaces have become a merchant of record as per the Supreme Court ruling.

Marketplace Facilitator Nexus 2025

A survey says that 33 states in 2021 reported $23 billion in remote sales tax revenue generation. It’s a great example of state sales tax connections entering the digital age.

When it comes to marketplace facilitator nexus laws, mega-corporations like eBay or Amazon have to worry about these laws. Instead, Amazon takes care of sales tax collecting and remitting since it’s the marketplace facilitator in this case.

However, these sellers are responsible for sales tax collection on any sales made outside of the marketplace (or if they directly sell stuff to someone).

Sales Tax Nexus by State in 2025

States with Physical Nexus Rules

All states where sales tax laws have been enacted also have physical nexus rules.

They might have different definitions of what constitutes physical presence.

However, the general rule is that nexus is established by different business activities, some of which are as follows:

1. If you’re physically present in a state with your office or retail store, you’re establishing a nexus.
2. If your employees are working within the state, you’re establishing a nexus (whether they are remote workers or work in-person).
3. Storing business inventory in a warehouse within the state leads to the nexus formally being established.
4. You’re establishing a nexus by participating in trade shows or conventions for the purpose of making sales & taking orders.
5. You can also trigger nexus via in-person sales calls with potential customers in that state (thereby creating a physical presence).
6. Having affiliate relationships or business partnerships within the state may also establish a nexus (especially if you’re selling something or promoting your business).

So, having offices or employees in California will establish a nexus. In New York, you establish nexus when you have inventory stored within this state. Iowa mandates sales tax collection even if traveling salespeople are present in the Hawkeye State.

These are some state-specific nexus thresholds that you should be aware of in 2025.

States with Economic Nexus Rules

Different states have various thresholds when it comes to economic nexus.

So, you should expect these thresholds in the states where economic nexus rules are valid:

1. $100k in sales or 200 transactions
2. $250k in sales
3. $500k in sales
4. Graduated thresholds (adjusting them over time)

Let’s give you a brief overview of state-specific economic nexus thresholds.

On the other hand, marketplace sales are also included when calculating your overall economic nexus.

States with Marketplace Facilitator Laws

Several states have enacted marketplace facilitator laws.

These laws require online platforms to collect and remit sales tax on a third-party seller’s behalf. This shift ensures that the sellers using these platforms are compliant with state laws regarding tax collection.

Let’s break down the case of marketplace facilitator thresholds as per different states in the United States:

If you’re a seller, then you should make sure that your facilitator is registered to collect and remit taxes in the state where you’re operating.

Sellers must monitor their total sales through different platforms as well, especially if they’ve exceeded any relevant thresholds that might affect their nexus status.

Understand all local laws regarding marketplace facilitators and always maintain accurate records of all transactions processed through that particular marketplace.

3 Key Changes to Nexus Laws in 2025

So, what’s new in nexus laws? Are you aware of 2025 nexus rules? We’ll mention three essential examples of how state-specific nexus thresholds have changed during this time:

1. Alaska Removing Transaction Thresholds

Effective on January 1, 2025, Alaska will eliminate the condition of 200 transactions for the establishment of economic nexus.

After this threshold is removed, remote sellers will only have to meet the $100,000 gross sales threshold to establish economic nexus 2025 in Alaska.

This way, sales tax compliance will become much easier for small business owners.

They won’t be able to track the number of transactions. Remote sellers with gross sales exceeding $100,000 will have economic nexus and be required to collect & remit local sales taxes in applicable jurisdictions.

2. Broader Economic Nexus Definitions

Many US states are adapting their tax laws.

The trend is shifting toward creating a much broader definition of what the term “economic nexus” even means.

We have repeated this information to the point of redundancy, where remote sellers have to meet the $100k quota to establish this nexus type. However, many states are adding additional conditions, such as:

• Digital Goods & Services: Many states are trying to include digital products (eBooks and software solutions) in their definition of taxable goods. So, more businesses may end up establishing economic nexus in the future.
• Marketplace Sales: Some states also want to consider Amazon-facilitated sales as part of the seller’s total sales when determining the seller’s nexus. However, this will only complicate sales tax compliance nexus for small-time sellers.

3. More Focus on Taxing Digital Goods

As online services and digital goods become mainstream, more states will start taxing these items by charging sales tax on them.

However, these states will have to redefine what tangible personal properties are so they can add digital downloads and cloud-based services to their list of taxable items.

Sellers in these sectors should prepare for increased scrutiny and potential tax obligations as state legislatures respond to the evolving digital economy.

How to Determine If You Have Nexus in a State?

Selling the US and want to check your Nexus obligation?

Consider this checklist. It’ll help you determine your nexus in a certain state.

1. Is your total sales revenue $100k or above? Are your sales transactions 200 in a given year? –> You can open your online store and check your sales data; you must find all your sales from the past year.
2. Do you have a physical location, warehouses, inventory, employees, trade shows, etc. in that state? –> Notice the presence of your agents as well as employees in different states. Don’t forget to check your digital activities, like advertising and affiliate relationships.
3. How much sales are you generating in the state as per your relationship with affiliates? –> Look into relevant legal guidelines regarding marketplace facilitators.
4. What constitutes nexus in that state? –> For that, you have to review the nexus threshold conditions for that state.
5. Does that state include all gross sales or your taxable sales only? –> It’ll help you evaluate your economic nexus thresholds.

Lastly, you should consult with tax gurus or legal advisors to stay compliant. Regularly monitor changes in nexus laws, as they can evolve based on legislative updates and court rulings.

Don’t forget to track sales and transactions across various states to ensure compliance. Accurate tracking is the best way to stay compliant in these cases.

Also, failure to collect and remit sales tax when demanded will result in major penalties and interest charges from state tax authorities.

Automate Nexus Compliance with TaxCloud

If you want to stay on top of your sales tax obligations, use automation tools like TaxCloud.

This tool will help you track nexus thresholds across different states and alert you whenever you’re about to approach/exceed them. TaxCloud has amazing features that help you track nexus in real-time and streamline tax collection in multiple states.

No matter what you sell or where you sell, TaxCloud supports you in all 13,000+ jurisdictions in the United States. If you’re a smaller merchant, you can benefit from TaxCloud’s free platform usage. For businesses already following nexus rules, TaxCloud offers the full visibility over nexus. This software combines all sales data in one place for stress-free tax compliance.

Stay ahead of your economic nexus exposure. TaxCloud helps your business follow the rules, increases your collection accuracy, and reduces audit risk.

No more manual filing – let TaxCloud handle your reports and returns to guarantee 100% compliance with all due dates and audit requests. TaxCloud integrates with your existing platforms!

That includes top e-commerce platforms, ERPs, payment processors, and other tools. For custom needs, you can use TaxCloud’s API. So, use TaxCloud to take your business to new heights!

What’s Next?

Hopefully, this state by state guide has helped you understand how economic nexus sales tax works. You should read more about exempt sales taxes, taxable transactions, statewide sales tax laws, sales tax commission, and other taxes on goods and services to better understand the financial impact of your economic presence.

In places like Oregon, Delaware, New Hampshire, etc., where there’s no sales tax, you should get relief. In areas like Utah, Wyoming, Washington, and similar states, you should talk to a sales tax expert.

This expert helps explain concepts like nontaxable sales and includable sales to you.

You’ll understand taxable services and sales revenue better this way.

Final Thoughts

In the end, we learned about sales tax nexus types. We discussed what this nexus is, how many nexus types there are, how to stay compliant, how nexus works in different states, and what changes you can expect in this regard.

This way, you can ensure compliance and avoid penalties. Always trust TaxCloud to automate this whole process for your benefit.

If your business operates in various states, then you can simplify tracking & compliance by using TaxCloud.

So, get started today with a free 30-day trial of TaxCloud and manage your sales tax nexus confidently. It’s the best way to secure your company’s profitability.