Economic Nexus and Remote Sellers

Economic nexus determines when a business is required to collect and remit sales tax in a state based on its economic activity, rather than a physical presence. This concept is especially important for remote sellers and online businesses that sell to customers in multiple states.

Since states impose sales tax obligations on out-of-state sellers, understanding economic nexus rules is essential for compliance.

What Is Economic Nexus?

Economic nexus is established when a seller’s level of business activity in a state exceeds thresholds set by that state. These thresholds are commonly based on:

• Total sales revenue delivered into the state
• Number of separate transactions shipped into the state

Once economic nexus is triggered, the seller is generally required to register, collect, and remit sales tax in that state.

Why Economic Nexus Matters for Remote Sellers

Remote sellers often operate without a physical presence in the states where their customers are located. Under modern sales tax laws, physical presence is no longer required to create tax obligations.

Remote sellers may also be subject to sales tax collection under
economic nexus rules.

Because each state defines its own thresholds, sellers must evaluate economic nexus on a state-by-state basis.

Common Economic Nexus Thresholds

Although economic nexus rules vary by state, many states use thresholds similar to:

• $100,000 in gross sales into the state during a year
• 200 or more separate transactions delivered into the state

Some states rely only on a dollar threshold, while others use different measurement periods or definitions of taxable sales.

For official guidance on how states define nexus standards, see the Streamlined Sales Tax Remote Seller FAQs.

Economic Nexus vs. Physical Nexus

Before economic nexus rules were adopted, sales tax obligations were based primarily on physical presence, such as:

• Having an office, warehouse, or storefront in the state
• Employing workers or sales representatives in the state
• Storing inventory in the state

Economic nexus expands these rules by allowing states to require tax collection based solely on economic activity.

Sales Tax Rates After Nexus Is Established

Once a seller has economic nexus, the seller must collect tax at the appropriate rate. This may include:

• State sales tax rates
• Local sales tax rates based on destination
• Special local district taxes

For a state-by-state overview of how sales and local tax rates work, see our guide on sales and local tax rates.

Economic Nexus and Use Tax

In situations where sales tax is not collected, use tax obligations may still apply. This is especially relevant for businesses making taxable purchases from out-of-state vendors.

For a detailed explanation of how use tax works, including reporting and forms, see our guide on Texas use tax.

Registering and Staying Compliant

When economic nexus is established, sellers typically must:

• Register with the state tax authority
• Collect sales tax on taxable transactions
• File periodic sales tax returns
• Remit collected tax on time

Official state registration and filing guidance can be found through each state’s department of revenue. For example, Texas provides detailed compliance information through the Texas Comptroller’s sales tax resources.

Final Note

Economic nexus rules significantly affect remote sellers and online businesses. Because thresholds and enforcement policies vary by state, sellers should regularly review official state guidance and monitor their sales activity to ensure ongoing compliance.

State-Specific Economic Nexus Guides

Texas economic nexus for remote sellers
California economic nexus for remote sellers