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.

Below there are three tables with up-to-date information about the following:

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 threshold is $100,000 in annual 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.

Heads up: you might also hear digital goods referred to as “digital services,” “e-goods,” or “e-services.” All of these terms refer to the same thing.

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?

States with General Economic Nexus Laws

The following includes all states in the US that have an economic nexus policy in place.

State Sales Transactions In effect on
* Both conditions at the same time
Alabama $250,000 - October 1, 2018
Colorado $100,000 200 December 1, 2018
Connecticut $250,000 200 December 1, 2018
Georgia $250,000 200 January 1, 2019
Hawaii $100,000 200 July 1, 2018
Illinois $100,000 200 October 1, 2018
Indiana $100,000 200 October 1, 2018
Iowa $100,000 200 January 1, 2019
Kentucky $100,000 200 October 1, 2018
Louisiana $100,000 200 January 1, 2019
Maine $100,000 200 July 1, 2018
Maryland $100,000 200 October 1, 2018
Massachusetts $500,000 100 October 1, 2017
Michigan $100,000 200 September 30, 2018
Minnesota $100,000 100 October 1, 2018
Mississippi $250,000 - September 1, 2018
Nebraska $100,000 200 January 1, 2019
Nevada $100,000 200 November 1, 2018
New Jersey $100,000 200 November 1, 2018
North Carolina $100,000 200 November 1, 2018
North Dakota $100,000 200 October 1, 2018
South Carolina $100,000 - November 1, 2018
South Dakota $100,000 200 November 1, 2018
Tennessee $500,000 - To be determined
Utah $100,000 200 January 1, 2019
Vermont $100,000 200 July 1, 2018
Washington $100,000 200 October 1, 2018
West Virginia $100,000 200 January 1, 2019
Wisconsin $100,000 200 October 1, 2018
Wyoming $100,000 200 To be determined

States with Economic Nexus for Digital Products

The following includes all states in the US that use the economic nexus for the sales of digital products.

State Sales Transactions In effect on
* Both conditions at the same time
Alabama $250,000 - October 1, 2018
Colorado $100,000 200 December 1, 2018
Connecticut $250,000 200 December 1, 2018
Hawaii $100,000 200 July 1, 2018
Indiana $100,000 200 October 1, 2018
Kentucky $100,000 200 October 1, 2018
Louisiana $100,000 200 January 1, 2019
Maine $100,000 200 July 1, 2018
Minnesota $100,000 100 October 1, 2018
Mississippi $250,000 - September 1, 2018
Nebraska $100,000 200 January 1, 2019
New Jersey $100,000 200 November 1, 2018
North Carolina $100,000 200 November 1, 2018
South Dakota $100,000 200 November 1, 2018
Tennessee $500,000 - To be determined
Utah $100,000 200 January 1, 2019
Vermont $100,000 200 July 1, 2018
Washington $100,000 200 October 1, 2018
Wisconsin $100,000 200 October 1, 2018
Wyoming $100,000 200 To be determined
 

States with Economic Nexus for SaaS Products

The following includes all states in the US that use the economic nexus for SaaS products.

State Sales Transactions In effect on
* Both conditions at the same time
Connecticut $250,000 200 December 1, 2018
Hawaii $100,000 200 July 1, 2018
Indiana $100,000 200 October 1, 2018
Massachusetts $500,000 100 October 1, 2017
Minnesota $100,000 100 October 1, 2018
South Carolina $100,000 - November 1, 2018
South Dakota $100,000 200 November 1, 2018
Tennessee $500,000 - To be determined
Utah $100,000 200 January 1, 2019
Washington $100,000 200 October 1, 2018
West Virginia $100,000 200 January 1, 2019

Notice & Report Laws in the US

“Notice and report” laws are similar to economic nexus policy, in that they serve the same goal: get out-of-state sellers to be responsible for sales tax.

Under these laws, remote businesses above a given threshold must notify certain customers that they need to pay taxes to their state revenue office, and then also report the list of these customers (and the amount of tax they owe) directly to that revenue office.

Basically, these laws ensure that remote businesses still play a part in the state’s revenue collection, even if the businesses aren’t registered for sales tax. It’s actually designed to be a hassle, in hopes that businesses just register for the state’s sales tax and start collecting it themselves!

Here are the few states operating with “notice and report” laws.

State Sales In effect on
Oklahoma $10,000 July 1, 2018
Pennsylvania $10,000 March 1, 2018
Rhode Island $100,000 August 8, 2017

Stay tax compliant around the world

Quaderno takes the pain out of sales tax, VAT & GST.
Automatically comply with all legal requirements, from invoices to tax returns.

Start a free 7 day trial