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Sales Tax by State: Economic Nexus Laws

by Jennifer Dunn

Updated December 12, 2018

Most online sellers are by now familiar with the term “sales tax nexus” as defined in the Quill v. North Dakota Supreme Court case. Long story short: retailers must have some kind of presence in a state before that state can require that retailer to collect sales tax from buyers in that state.

However, with the Supreme Court ruling in the South Dakota v. Wayfair case, the precedent set by Quill has now been overturned.  Now, not only does physical presence (such as a location, employee or inventory), but “economic” presence in a state creates sales tax nexus.

In other words, due to the Wayfair ruling, even if you do not have a physical presence in a state, if you pass a state’s economic threshold for total revenue or number of transactions in that state, you’re legally obligated to collect and remit sales tax to that state.

This post will explain the state of “economic nexus,” discuss what online sellers need to know, and detail each current economic nexus law on the books.

NEW: If you don’t want to go through each economic nexus law line-by-line and compare it to your sales, TaxJar’s Sales and Transactions Checker will instantly check for you and tell you where you have economic nexus. Just connect your online store(s) to the Checker to get started.

What are economic nexus laws?

To combat what they see as an unfair precedent set by Quill, some states prematurely passed laws that read something like, “If an online seller, even though they don’t have a presence in our state, makes more than $X in sales in our state, or conducts more than X number of transactions in our state, then they are required to collect sales tax from buyers in our state.”

These laws were knowingly contrary to Supreme Court precedent. But after the Supreme Court ruling in South Dakota v. Wayfair, states are now free to enforce these laws on businesses.

State laws on economic nexus vary. The sales thresholds vary from $10,000 to $500,000 in sales, and some states don’t have a transaction threshold at all.

How did we get here?

Ohio was the first state to float the idea of economic nexus. Way back in 2005, they passed a “Commercial Activity Tax” (CAT) law. This law stated that any retailer who makes more than $500,000 in sales in Ohio is subject to Ohio’s sales tax collection laws. And that was it – there was no need for that retailer to have an employee, location, inventory, etc. in the state. All they had to do to be subject to the law was make over $500,000 in sales to Ohio buyers.

From there, other states began to follow suit and pass similar laws. It’s probably no surprise that many of these laws were aimed at eCommerce giants like Amazon, which until last year was not collecting sales tax in all U.S. states. Amazon finally buckled and began collecting sales tax from buyers in every U.S. state, but states are still hungry for tax revenue and continue to attempt to enforce these laws on other retailers.

Are economic nexus laws even legal?

We just found out the answer to that is “Yes.” South Dakota passed a particularly aggressive economic nexus law, and the Supreme Court heard the case dealing with this issue this year.

South Dakota Senate Bill 106 stated that any retailer with sales into South Dakota exceeding $100,000 was required to collect and remit South Dakota sales tax. Then they took it a step further by sending out notices of lawsuit to four vendors who they felt met this threshold but were not collecting sales tax: Newegg, Overstock.com, Systemax and Wayfair. Newegg, Overstock.com and Wayfair all fought back through the courts, and the Supreme Court ruled in favor of South Dakota.

Since this ruling has happened, states’ economic nexus laws are now allowed to stand, and some online sellers will be required to collect sales tax in more states than before.

You can read more about South Dakota v. Wayfair here.

What do economic nexus laws mean for online sellers?

Online sellers who did not have the means or the will to fight in court have capitulated and started collecting sales tax from buyers in states with sales tax nexus laws. Other online sellers, banking that these laws wouldn’t stand up in court against the Quill precedent, took a wait-and-see approach and will make a decision regarding sales tax collection after South Dakota v. Wayfair. Now that decision has been made.

Since Quill is overturned, states are free to pursue sales tax from online retailers who exceed the thresholds as stated in their economic nexus laws. However, there’s also a chance that Congress could step in and pass a law regulating sales tax. Right now, we live in a sales tax Wild West, and we’ll be closely following all these decisions as they unfold.

If you meet economic nexus thresholds in some states, we recommend speaking with a vetted sales tax expert to determine your best course of action.

How are economic nexus laws different from notice and report laws?

“Notice and report” laws are state laws that require online sellers with no physical presence in a state to either collect sales tax or provide a significant amount of reporting to states and their buyers if they meet a certain revenue or transaction threshold. While these sound similar to economic nexus laws, they are slightly different.

The biggest difference between economic nexus laws and notice and report laws are that notice and report laws have been legally in effect starting July 1, 2017, starting with the state of Colorado’s notice and report law. Economic nexus laws were not declared Constitutional until June 21, 2018 when SCOTUS handed down their decision in South Dakota v. Wayfair.

As a seller, this could make a big difference to you if have not been sales tax compliant. For example, as of right now, no states have attempted to apply economic nexus sales tax laws to online sellers retroactively. So if you are just now learning about economic nexus, you do have time to become compliant. But if you have not been compliant in states with notice and report laws, you may want to consult a sales tax expert on how to mitigate any damage since these laws have been in effect for several months at this point.

Economic Nexus Laws, by State

Important to note: This area of law is changing rapidly. While we strive to keep this post up to date, please use it as a guideline only and consult with a sales tax expert should you have specific questions as to how economic nexus applies to your business.

Important note: For simplicity, I refer to this tax as “sales tax” throughout this article. In some if not all cases, however, out-of-state sellers are technically required to collect “use tax.” Use tax is generally (but not always) collected at the same rate as sales tax, and is the term used to refer to sales tax collected by a retailer based out-of-state.

Alabama

Threshold: $250,000/year based on the previous calendar year’s sales

Summary: According to state law, sellers who exceed the $250,000 sales threshold are required to register for an Alabama sales tax permit, collect sales tax on sales that ship to Alabama, and remit that sales tax to the state.

You can read the text of Alabama’s economic nexus law here.

You can read guidance on economic nexus for sellers from the Alabama Department of Revenue here.

Effective date: January 1, 2016


Arkansas

Threshold: $100,000/year in gross revenue or 200 or more separate transactions on the previous calendar year’s sales

Summary: According to state law, sellers who exceed the gross sales OR transaction number are required to register for an Arkansas sales tax permit, collect sales tax on sales that ship to Arkansas, and remit the sales tax to the state.

Effective date:Planned for the future (No date given yet)


California

Threshold:$100,000/year in gross revenue or 200 or more separate transactions on the previous or current calendar year’s sales

Summary: According to state law, remote sellers in California who exceed the $100K gross sales or the 200 transactions number are required to register with the CDTFA, collect sales tax on sales that ship to California, and remit the sales tax to the state.

You can read more on the California guidance for remote sellers here.

Effective date: April 1, 2019


Colorado

Threshold:$100,000/year in gross revenue or 200 or more separate transactions on the previous or current calendar year’s sales

Summary: According to state law, sellers who exceed the gross sales are required to register for a Colorado sales tax permit, collect sales tax on sales that ship to Colorado, and remit the sales tax to the state.

You can read more on the Colorado guidance for remote sellers here.

Effective date: December 1, 2018


Connecticut

Threshold: $250,000/year in gross revenue AND 200 or more separate transactions on the previous calendar year’s sales

Summary: According to state law, sellers who exceed the gross sales AND transaction number are required to register for a Connecticut sales tax permit, collect sales tax on sales that ship to Connecticut, and remit the sales tax to the state.

Effective date: December 1, 2018


Georgia

Threshold (Starting January 1, 2019): $250,00/year in gross revenue, or makes sales into Georgia in more than 200 separate transactions in the previous or current calendar year

Summary: According to the state, sellers that meet either the sales or transaction number thresholds are required to register for a Georgia sales tax permit, collect sales tax on sales that ship into Georgia, and remit sales tax to the state.

You can read the text of Georgia’s economic nexus law here.

Effective date: January 1, 2019


Hawaii

Threshold: $100,000/year in gross revenue, or makes sales into Hawaii in more than 200 separate transactions in the previous or current calendar year

Summary: According to the state, sellers that meet either the sales or transaction number thresholds are required to register for a Hawaii sales tax permit, collect sales tax on sales that ship into Hawaii, and remit sales tax to the state.

You can read the text of Hawaii’s economic nexus law here.

You can read guidance for vendors from the Hawaii Department of Revenue here.

Effective date: July 1, 2018


Illinois

Threshold: $100,000/year in gross revenue, or makes sales into Illinois in more than 200 separate transactions in the previous twelve months

Summary: According to the state, sellers that meet either the sales or transaction number thresholds are required to register for a Illinois sales tax permit, collect sales tax on sales that ship into Illinois, and remit sales tax to the state.

You can read the text of Illinois economic nexus law here.

Effective date: October 1, 2018


Indiana

Threshold: $100,000 in gross revenue in the previous calendar year, or makes sales into Indiana in more than 200 separate transactions in the current or last calendar year

Summary: According to state law, sellers who exceed either the gross sales or transaction number threshold are required to register for an Indiana sales tax permit, collect sales tax on sales that ship to Indiana, and remit that sales tax to the state.

You can read the text of Indiana’s economic nexus law here, and a summary on p. 13 here.

Important note: This law is currently being challenged by the trade associations NetChoice and the American Catalog Mailers Association. You can read more about the law and the current legal challenge here.

Effective date: October 1, 2018


Iowa

Threshold (Starting January 1, 2019): $100,000/year in gross revenue, or makes sales into Iowa in more than 200 separate transactions in the previous or current calendar year

Summary: According to the state, sellers that meet either the sales or transaction number thresholds are required to register for an Iowa sales tax permit, collect sales tax on sales that ship into Iowa, and remit sales tax to the state.

You can read the text of Iowa economic nexus law here.

You can read guidance on economic nexus from the Iowa Department of Revenue here.

Effective date: January 1, 2019


Kentucky

Threshold: $100,000/year in gross revenue, or makes sales into Kentucky in more than 200 separate transactions in the previous or current calendar year

Summary: According to the state, sellers that meet either the sales or transaction number thresholds are required to register for a Kentucky sales tax permit, collect sales tax on sales that ship into Kentucky, and remit sales tax to the state.

You can read the text of Kentucky economic nexus law here.

You can read economic nexus guidance for vendors from the Kentucky Department of Revenue here.

Effective date: July 1, 2018


Louisiana

Threshold: $100,000/year in gross revenue, or makes sales into Louisiana in more than 200 separate transactions in the previous or current calendar year

Summary: According to the state, sellers that meet either the sales or transaction number thresholds are required to register for a Louisiana sales tax permit, collect sales tax on sales that ship into Louisiana, and remit sales tax to the state.

You can read the text of Louisiana economic nexus law here.

You can read the Louisiana Department of Revenue’s news release about South Dakota v. Wayfair and economic nexus here.

Effective date:  January 1, 2019 (“The date of the Wayfair ruling”)


Maine

Threshold: $100,000 in gross revenue in the previous calendar year or current calendar year, or makes sales into Maine in more than 200 separate transactions in the previous calendar year or current calendar year

Summary: According to state law, sellers who either exceed the gross sales or transaction number threshold are required to register for a Maine sales tax permit, collect sales tax on sales shipped to Maine, and remit that sales tax to the state.

You can read all about Maine’s economic nexus law here (starting on p. 111.)

Effective date: July 1, 2018


Maryland

Threshold:$100,000/year in gross revenue, or makes sales into Maryland in more than 200 separate transactions in the previous or current calendar year.

Summary: According to the state, sellers that meet either the sales or transaction number thresholds are required to register for a Maryland sales tax permit, collect sales tax on sales that ship into Maryland, and remit sales tax to the state.

You can read more details of Maryland economic nexus law here.

Effective date: October 1, 2018


Massachusetts

Threshold: $500,000 in sales over the preceding calendar year, AND 100 or more transactions resulting in delivery into Massachusetts in the preceding calendar year

Summary: According to state law, sellers who exceed the gross sales and transaction number threshold are required to register for a Massachusetts sales tax permit, collect sales tax on sales that ship to Massachusetts, and remit that sales tax to the state.

You can read Massachusetts’ economic nexus law here.

Effective date: October 1, 2017


Michigan

Threshold:$100,000 in gross revenue in the last calendar year or makes sales into Michigan in more than 200 separate transactions in the previous calendar year.

Summary: According to state law, sellers who exceed the $100,000 threshold or the transaction number threshold are required to register for a Michigan sales tax permit, collect sales tax on sales that ship to Michigan, and remit sales tax to the state.

You can read Michigan economic nexus law here.

Effective date: October 1, 2018


Minnesota

Threshold:$100,000 in gross revenue in the last 12 months or makes sales into Minnesota in more than 100 separate transactions in the previous 12 months.

Summary: According to state law, sellers who exceed either the $100,000 threshold or the transaction number threshold  are required to register for a Minnesota sales tax permit, collect sales tax on sales that ship to Minnesota, and remit sales tax to the state.

You can read Minnesota economic nexus law here.

Effective date: October 1, 2018


Mississippi

Threshold: Sales into Mississippi that exceed $250,000 in the prior twelve months

Summary: According to state law, sellers who exceed the $250,000 threshold are required to register for a Mississippi sales tax permit, collect sales tax on sales that ship to Mississippi, and remit sales tax to the state.

You can read Mississippi’s economic nexus laws here (starting on p. 32.)

Effective date: December 1, 2017


Nebraska

Threshold:Sales into North Dakota exceeding $100,000 or sales were made in 200 or more separate transactions in the current or last calendar year.

Summary: According to the state, sellers who exceed the sales threshold or transaction number are required to register for a Nebraska sales tax permit, collect sales tax on sales that ship into Nebraska, and remit sales tax to the state.

You can read about Nebraska’s economic nexus law here.

Effective date: January 1, 2019


New Jersey

Threshold: Sales of $100,000 in New Jersey, or more than 200 transactions in the state in the current or last calendar year.

Summary: According to the state, sellers that meet either the sales or transaction number thresholds are required to register for a New Jersey sales tax permit, collect sales tax on sales that ship into New Jersey, and remit sales tax to the state.

You can read guidance on the text of New Jersey economic nexus law here.

Effective date: November 1, 2018 (Delayed from the previous date of October 1, 2018).


Nevada

Threshold: $100,000/year in gross revenue the previous calendar year OR 200 or more separate transactions in the previous or current calendar year.

Summary: According to the state, sellers that meet either the sales or transaction number thresholds are required to register for an Nevada sales tax permit, collect sales tax on sales that ship into Nevada, and remit sales tax to the state.

Full text: You can read guidance on Nevada remote seller information here.

Effective date: October 1, 2018


North Carolina

  • State: North Carolina
  • Threshold: $100,000/year in gross revenue, or makes sales into North Carolina in more than 200 separate transactions in the current or last calendar year.
  • Summary: According to the state, sellers that meet either the sales or transaction number thresholds are required to register for a North Carolina sales tax permit, collect sales tax on sales that ship into North Carolina, and remit sales tax to the state.

You can read about North Carolina’s economic nexus law here.

Effective date: November 1, 2018


North Dakota

Threshold: Sales into North Dakota exceeding $100,000 or sales were made in 200 or more separate transactions

Summary: According to the state, sellers who exceed the sales threshold or transaction number are required to register for a North Dakota sales tax permit, collect sales tax on sales that ship into North Dakota, and remit sales tax to the state.

You can read about North Dakota’s economic nexus law here.

You can find guidance on economic nexus from the North Dakota State Tax Commissioner here.

Effective date: October 1, 2018


Oklahoma

Important note: This is a “notice & report law” which was not affected by the South Dakota v. Wayfair case. That means that this law has been in effect and was being legally enforced before the June 21, 2018 date the Wayfair ruling was handed down. You can read more about notice & report laws here.

Threshold: Sales in Oklahoma of at least $10,000 in the previous 12 months

Sellers who meet the threshold are required to elect to do one of the following on or before June 1 of each calendar year:

  1. Register for an Oklahoma sales tax permit and collect sales tax on Oklahoma sales
  2. Comply with Oklahoma’s notice and reporting requirements 

You can read Oklahoma’s full economic nexus law here.

Effective date: 4/10/2018


Pennsylvania

Important note: Pennsylvania’s law is a “notice & report law” which was not affected by the South Dakota v. Wayfair case. That means that this law has been in effect and was being legally enforced before the June 21, 2018 date the Wayfair ruling was handed down. You can read more about notice & report laws here.

Threshold: Sales into Pennsylvania that exceeded $10,000 in the previous 12-month period

Summary: According to Pennsylvania, sellers who meet the threshold are required to make an election by March 1 of every year and do one of two things:

  1. Register for a Pennsylvania sales tax permit, collect sales tax on sales that ship into Pennsylvania, and remit sales tax to the state.
  2. Comply with the state’s rigorous “notice and reporting requirements.” (Read more about Notice and Reporting requirements here.)

You can read more about Pennsylvania’s economic nexus law (and notice and reporting requirements) here.

Effective date: April 1, 2018


Rhode Island

Important note: This is a “notice & report law” which was not affected by the South Dakota v. Wayfair case. That means that this law has been in effect and was being legally enforced before the June 21, 2018 date the Wayfair ruling was handed down. You can read more about notice & report laws here.

Threshold: Sales in Rhode Island were of $100,000 or more, or exceeded 200 separate transactions in the state in a calendar year

Summary: According to the state, sellers that meet either the sales or transaction number thresholds are required to register for a Rhode Island sales tax permit, collect sales tax on sales that ship into Rhode Island, and remit sales tax to the state.

You can read Rhode Island’s economic nexus law (and notice and reporting requirements) here.

You can read guidance for vendors from the Rhode Island Department of Revenue here.

Effective date: July 15, 2017


South Carolina

Threshold: Sales of $100,000 in South Carolina in the previous or current calendar year

Summary: According to the state, sellers that meet either the sales or transaction number thresholds are required to register for a South Carolina sales tax permit, collect sales tax on sales that ship into South Carolina, and remit sales tax to the state.

You can read guidance on South Carolina’s economic nexus law here.

Effective date: November 1, 2018


South Dakota

Threshold: Sales of $100,000 in South Dakota, or more than 200 transactions in the state in a the current or last calendar year

Summary: According to the state, sellers that meet either the sales or transaction number thresholds are required to register for a South Dakota sales tax permit, collect sales tax on sales that ship into South Dakota, and remit sales tax to the state.

Effective date: November 1, 2018


Tennessee

Threshold: Sales exceeding $500,000 in the state in the previous 12 months

Summary: According to the state, sellers with sales exceeding the threshold are required to register for a Tennessee sales tax permit, collect sales tax on sales that ship into Tennessee, and remit sales tax back to the state.

You can read about Tennessee’s economic nexus law here.

Effective date: July 1, 2017 (pending litigation)


Utah

Threshold: Sales of $100,000 or more in the state, or at least 200 individual sales transactions into the state in the current or last calendar year.

Summary: According to the state, sellers with sales equal to or exceeding the sales or transaction number thresholds are required to register for a Utah sales tax permit, collect sales tax on sales that ship into Utah, and remit sales tax to the state.

You can read about Utah’s economic nexus law here.

Effective date: January 1, 2019


Vermont

Threshold: Sales of $100,000 or more in the state, or at least 200 individual sales transactions into the state

Summary: According to the state, sellers with sales equal to or exceeding the sales or transaction number thresholds are required to register for a Vermont sales tax permit, collect sales tax on sales that ship into Vermont, and remit sales tax to the state.

You can read guidance on economic nexus from the Vermont Department of Revenue here.

Effective date: July 1, 2018


Washington (*this state has both Economic Nexus & Notice & Report thresholds)

Important note: There is a “notice & report law” which was not affected by the South Dakota v. Wayfair case. That means that this law has been in effect and was being legally enforced before the June 21, 2018 date the Wayfair ruling was handed down. You can read more about notice & report laws here.

Economic Nexus Threshold: Sales of $100,000 or more into the state OR 200 separate transactions into Washington in the current or last calendar year.

  • According to the state, sellers with sales equal to or exceeding the sales or transaction number thresholds are required to register for a Washington sales tax permit, collect sales tax on sales that ship into Washington, and remit sales tax to the state.

Notice & Report Threshold: Sales of $10,000 or more into the state

  • According to Washington Notice & Report, sellers who make $10,000 or more in sales to buyers in the state are required to do one of two things:
  1. Register for a Washington sales tax permit, collect sales tax on sales that ship into Washington, and remit sales tax to the state.
  2. Comply with Washington’s rigorous notice and reporting requirements.

You can read more about Washington’s economic nexus law (and notice and reporting requirements) here.

Effective date: Notice & Report (January 1, 2018) Economic Nexus (October 1, 2018)


Wisconsin

Threshold: Sales of $100,000 or more annually or 200 or more separate transactions into the state in the current or last calendar year.

Summary:  Unlike other states on this list, Wisconsin did not have an economic nexus law in effect before Wayfair v. South Dakota. However, in response to the SCOTUS decision, the Wisconsin Department of Revenue issued a statement about how Wisconsin intends to enforce the Wayfair decision.

Effective date: October 1, 2018


Wyoming

Threshold: Sales of $100,000 or more into the state, or 200 or more separate transactions into the state

Summary: According to the state, sellers with sales equal to or exceeding the sales or transaction number thresholds are required to register for a Wyoming sales tax permit, collect sales tax on sales that ship into Wyoming, and remit sales tax to the state.

You can read Wyoming’s economic nexus law here.

Effective date: July 1, 2017


I hope this post has provided more detail about the plethora of economic nexus laws in the U.S.. Once again, it’s vitally important to stress that these laws are subject to change, and you should almost always consult with the state’s department of revenue or a trusted tax advisor before making major decisions about your business.

Do you have questions or something to say about economic nexus? Start the conversation in the comments!

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