In 2018, the U.S. Supreme Court issued a ruling called South Dakota v. Wayfair and quietly changed the rules for every small business that sells across state lines. Eight years later, most business owners I talk to still don’t know it happened — until they get a letter.
The old rule was physical presence. If you didn’t have an office, a warehouse, or an employee in a state, that state couldn’t make you collect sales tax. The Wayfair ruling threw that out. Now all 45 sales-tax states and Washington D.C. can require you to collect and remit sales tax based purely on what you sell there — no physical presence required.
This is called “economic nexus.” And if you sell products or taxable services online, you almost certainly have it in more states than you think.
How the Threshold Works
Most states set the trigger at $100,000 in sales to customers in that state during the prior 12-month period. Some states add a transaction count — 200 separate transactions — but that rule is fading fast. Illinois dropped it entirely as of January 1, 2026. More states are following.
New York is a little different. The threshold here is $500,000 in sales and 100 or more separate transactions. That’s a higher bar, so many smaller businesses don’t hit it in New York first. But they hit it in other states and don’t realize it.
If you’re selling $150,000 worth of products to customers in Florida, $120,000 to customers in Texas, and $110,000 to customers in Georgia, you have economic nexus in all three — and an obligation to collect and remit sales tax in all three. The fact that you’re based in New York doesn’t change that.
If your business sells online and you're not sure where you have nexus obligations, schedule a call. This is exactly the kind of thing that's straightforward to get ahead of and expensive to clean up later.
What Happens If You Don’t Register
You keep selling. The state notices — either through a marketplace audit, a tip, or their own data matching programs. They assess back taxes for every year you had nexus and didn’t collect. Then they add interest, typically 6–12% per year. Then penalties on top of that.
By the time a business owner walks into my office with one of these notices, the original unpaid sales tax has often doubled because of the interest and penalty load. That’s not hypothetical — that’s what multi-year noncompliance looks like.
The good news is that most states have voluntary disclosure programs. If you come in before they find you, you can typically cap the lookback period at three years or less, reduce or waive penalties, and pay the base tax plus limited interest. It’s not fun — but it’s a fraction of what you’d owe if the state initiates the audit.
What “Collecting Sales Tax” Actually Means
Once you have nexus in a state, you have to:
- Register with that state’s revenue department and get a permit
- Charge customers the correct sales tax rate for their specific location (which changes by city and county — not just by state)
- File periodic returns and remit what you collected
Most e-commerce platforms — Shopify, WooCommerce, BigCommerce — can handle the collection piece once you tell them where you’re registered. The filing and remittance is a separate issue and often where things go wrong.
If you’re selling on Amazon, Etsy, or another marketplace, you may be partially covered. Marketplace facilitators are generally required to collect and remit on your behalf for sales made through their platform. But sales you make through your own website — your direct channel — are still your responsibility.
The Product Matters Too
Not everything is taxable in every state. Groceries, clothing, prescription drugs — the rules vary dramatically. New York famously doesn’t tax most clothing items under $110, but most other states do. If you’re selling across state lines, you need to understand not just where you have nexus, but what’s taxable there.
Selling services adds another layer. Certain digital services, SaaS subscriptions, and professional services are taxable in some states and exempt in others. This has been evolving rapidly as states try to capture revenue from software and remote services.
Don’t Wait for a Notice
If your business has been growing and you’ve expanded your online reach, the nexus question isn’t hypothetical. It’s a math problem: look at your sales by state, compare them to the thresholds, and find out where you’re over the line. If you’re not sure how to pull that data, your e-commerce platform almost certainly can generate a sales-by-state report.
The New York sales tax certificate of authority is a good starting point for understanding how the registration and compliance process works — but it’s only one state. If you’re selling nationally, that’s just the beginning.
The businesses that handle this right are the ones that get ahead of it proactively. Let's figure out where you stand before a state revenue department does it for you.
Sales tax compliance across multiple states is genuinely complicated, and it compounds every year you let it go. Getting it sorted now — through voluntary disclosure if you’re behind, or clean registration going forward — is almost always cheaper than the alternative.
This post is for general educational purposes and does not constitute tax or legal advice. Sales tax nexus rules, thresholds, and taxability determinations vary significantly by state and are subject to legislative change. Consult a qualified tax professional to assess your specific compliance obligations.