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The Ultimate Guide to US Economic Nexus

Does your business have  customers in the United States? Okay, listen up. Economic nexus laws demand the attention of every business, especially online sellers, SaaS companies, and any other kind of e-Commerce.

Sure, US sales tax is a tricky web, but you don’t need to get caught in it! We’re here to help you understand what economic nexus means, how it works, and which states use it.

What Does “Nexus” Mean?

The term “nexus” refers to a commercial connection in the state. A nexus is something you have. So, your business either has nexus in a state, or it doesn’t have nexus in a state. When you do have nexus, that means you’re obligated to collect tax on your sales there. Each state has their own variety of sales tax nexus.

Traditionally, nexus have been determined by “sufficient physical presence,” and there are multiple ways your business could satisfy the requirement of “sufficient physical presence.” It could be through a brick-and-mortar office, a single sales representative, a high-grossing affiliate business, or even using cookies on computers located in the area.

Nowadays there are several different kinds of nexus, including some that are not based on physical presence. This guide focuses solely on the economic nexus.

Want to learn more about the various types of nexus and how they underpin the US sales tax system? Check out our Quick Guide to US Sales Tax Nexus.

What is Economic Nexus?

An economic nexus is a sales tax nexus determined by economic activity, i.e. - the amount of sales you make in a particular state. Any kind of economic activity could trigger the nexus, once your total sales reach a certain amount.

You can acquire an economic nexus regardless of where your business, employees, or warehouses are located. If your sales in that state are substantial enough, then you are liable for sales tax there. End of discussion.

But what’s substantial enough? Generally, states with economic nexus have a threshold in place. The common annual thresholds are $100,000 in sales or 200 separate sales transactions, whichever your business reaches first. However, exact numbers can vary by state, so it’s best to check each state individually.

For further information on the development of these economic nexus policies, read our blog post on the recent US Supreme Court decision of Wayfair vs. South Dakota.

Which US States have Economic Nexus?

Name Thresholds
Alabama 250000 USD
Alaska 200 transactions or 100000 USD
Arizona 100000 USD
Arkansas 200 transactions or 100000 USD
California 500000 USD
Colorado 100000 USD
Connecticut 200 transactions and 100000 USD
Florida 100000 USD
Georgia 200 transactions or 100000 USD
Hawaii 200 transactions or 100000 USD
Idaho 100000 USD
Illinois 200 transactions or 100000 USD
Illinois 100000 USD
Indiana 200 transactions or 100000 USD
Iowa 100000 USD
Kansas 100000 USD
Kentucky 200 transactions or 100000 USD
Louisiana 100000 USD
Maine 100000 USD
Maryland 200 transactions or 100000 USD
Massachusetts 100000 USD
Michigan 200 transactions or 100000 USD
Minnesota 200 transactions or 100000 USD
Mississippi 250000 USD
Missouri 100000 USD
Nebraska 200 transactions or 100000 USD
Nevada 200 transactions or 100000 USD
New Jersey 200 transactions or 100000 USD
New Mexico 100000 USD
New York 100 transactions and 500000 USD
North Carolina 200 transactions or 100000 USD
North Dakota 100000 USD
Ohio 200 transactions or 100000 USD
Oklahoma 100000 USD
Pennsylvania 100000 USD
Rhode Island 200 transactions or 100000 USD
South Carolina 100000 USD
South Dakota 100000 USD
Tennessee 100000 USD
Texas 500000 USD
Utah 200 transactions or 100000 USD
Vermont 200 transactions or 100000 USD
Virginia 200 transactions or 100000 USD
Washington 100000 USD
Washington DC 200 transactions or 100000 USD
West Virginia 200 transactions or 100000 USD
Wisconsin 100000 USD
Wyoming 200 transactions or 100000 USD

Still confused about what economic nexus is? Watch our explainer video here:

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