Economic Nexus Laws: What Every Business Needs to Know About Sales Tax

In today’s increasingly digital economy, businesses are no longer confined by geography. Selling products or services across state lines—whether online or offline—opens new doors for growth. However, it also opens the door to economic nexus laws, a crucial and evolving component of sales tax compliance.

If you’re unfamiliar with economic nexus—or you’ve been assuming it only affects large e-commerce retailers—it’s time to take a closer look. This guide breaks down what economic nexus means, why it matters for all types of businesses, and how you can stay compliant in an ever-changing tax landscape.

What Is Economic Nexus?

Economic nexus refers to a business's tax obligation in a state based on economic activity (such as revenue or transaction volume), even if it has no physical presence in that state.

This standard was established in the 2018 U.S. Supreme Court decision in South Dakota v. Wayfair, Inc., which empowered states to require out-of-state businesses to collect and remit sales tax once they exceed certain thresholds.

Who Is Affected by Economic Nexus?

Originally aimed at large online retailers, economic nexus laws now affect a wide range of businesses, including:

• Product-based sellers (online or catalog)

• Service providers (digital, consulting, marketing)

• Software and SaaS companies

• Subscription box businesses

• Freelancers or contractors serving out-of-state clients

If your business sells into multiple states, it’s critical to understand whether your activity meets that state’s nexus threshold.

Typical Economic Nexus Thresholds

Although each state sets its own rules, the most common thresholds include:

• $100,000 in annual sales, or

• 200 separate transactions in a state

Exceeding either could trigger nexus, requiring you to register, collect, and remit sales tax—even if you’re operating from a completely different state.

⚠️ Note: Some states use a revenue-only threshold and have removed the transaction count altogether. Always check the latest regulations.

How to Stay Compliant with Economic Nexus Laws

Here’s what business owners should do to stay ahead of their obligations:

✅ 1. Monitor Your Sales Activity

Track your gross sales and transaction counts in every state where you have customers. Use a reliable accounting system or sales tax software to automate this process.

✅ 2. Identify Where You Have Nexus

Review each state’s nexus thresholds. If you meet or exceed a threshold, you’re likely required to register for a sales tax permit in that state.

✅ 3. Register Before Collecting

Once nexus is triggered, don’t collect sales tax until you’re officially registered with that state’s tax authority. Doing so prematurely can lead to penalties.

✅ 4. Apply Correct Tax Rates

Different jurisdictions within a state may have varying rates. Make sure you're applying accurate rates based on the buyer’s location.

✅ 5. File Returns on Time

Stay aware of filing deadlines, which can differ by state. Missing a deadline—even unintentionally—can result in penalties and interest charges.

How Manage My Sales Tax Can Support Your Compliance Journey

Navigating economic nexus laws doesn’t have to be overwhelming. That’s where we come in.

At Manage My Sales Tax, we specialize in helping businesses like yours stay compliant with multistate sales tax regulations, including economic nexus. Our experienced team works behind the scenes to:

• Analyze your nexus exposure

• Register you in applicable states

• Ensure accurate rate setup

• File sales tax returns on your behalf

• Keep your records audit-ready

So you can focus on growing your business—without the tax headaches.

💡 Whether you're selling products, services, or software across state lines, we’ll make sure you’re covered.

🔗 Let’s simplify sales tax compliance together. Visit our website to learn more and schedule a consultation today.