Economic Nexus
A sales tax obligation triggered by reaching revenue thresholds in a state.
1 min readLast updated Apr 2026
Quick Reference
CategoryLegal, Compliance & Privacy
Related Terms1
A sales tax obligation triggered by reaching revenue thresholds in a state.
Why It Matters
Post-Wayfair (2018), states can require tax collection based on sales volume, not just physical presence. Growing D2C brands hit these thresholds quickly.
Practical Example
Scenario
A home goods brand analyzes their state-by-state sales.
Calculation
Florida: $105K (threshold: $100K) ✓ Must collect. New York: $480K (threshold: $500K) ✗ Not yet. Texas: $505K (threshold: $500K) ✓ Must collectResult
Identified 8 states requiring registration, avoiding $40K+ in potential back taxes and penalties
Pro Tips
- 1Track sales by state monthly—crossing a threshold mid-year creates immediate obligation
- 2Know that thresholds are typically rolling 12 months or current/prior calendar year
- 3Some states have transaction count thresholds too (e.g., 200 transactions)
Common Mistakes to Avoid
Assuming you only have nexus in your home state—economic nexus changed everything in 2018
Not monitoring smaller states where thresholds are low ($100K is easy to hit)
Waiting until year-end to check—you should register when threshold is crossed