Sales Tax Nexus: When Another State Makes You Collect
How online sales created tax obligations in states where you have no office, the thresholds that trigger registration, marketplace rules, and what to do about past exposure.
Reviewed by the Fairlight Accounting cross-border tax team — U.S. & Canadian Tax Desks
Sales tax nexus is the connection that obligates a business to collect a state's sales tax. Physical presence — an office, inventory, employees — has always created it. Since the 2018 Wayfair decision, economic activity alone does too: most states require collection once sales into the state pass $100,000 a year. Marketplaces usually collect for sales they process.
On this page
What creates nexus?
| Type | Examples |
|---|---|
| Physical | Office, warehouse, inventory (including in a fulfillment center), employees, contractors making repairs, trade shows beyond a de minimis number of days |
| Economic | Sales into the state above the state's threshold in the current or prior year — $100,000 in most states; some add or use 200 transactions |
| Marketplace | Sales through a marketplace that collects on your behalf count toward your own threshold in some states but not others; the marketplace collects the tax |
| Affiliate and click-through | Referral arrangements in some states |
Florida's threshold is more than $100,000 of taxable remote sales into Florida in the prior calendar year, with no transaction count, and since July 1, 2021 Florida has required marketplace providers to collect on sales they facilitate.
What is taxable?
Tangible goods are taxable almost everywhere. Services, software subscriptions, and digital products vary: some states tax software as a service, some do not, and some tax only certain services. A business must check taxability product by product in each state where it has nexus; nexus without taxable sales creates a registration question but no tax.
What happens once you have nexus?
Register with the state, collect tax at the rate for the delivery address (most states source to destination), file returns on the schedule assigned — monthly, quarterly, or annually — and remit. Collected tax is a trust fund liability; owners can be personally liable for amounts collected and not remitted. Exemption certificates from resellers and exempt buyers must be kept on file.
What about past exposure?
A business that crossed thresholds years ago without registering owes the tax it should have collected, plus penalties and interest, even though it never collected from customers. Most states offer voluntary disclosure agreements that limit the look-back period (often three or four years) and waive penalties if you come forward before the state contacts you.
Frequently asked questions
Does selling only through Amazon or Etsy mean I can ignore sales tax?
The marketplace collects on those sales, but inventory in fulfillment centers may create physical nexus for your direct sales, and some states still require registration.
Do I need to collect from customers in states where I have no nexus?
No. Nexus is state by state.
Does Florida tax services?
Only specific ones, such as nonresidential cleaning, nonresidential pest control, detective and security services, and certain others; most professional services are not taxable.
Is sales tax an expense of the business?
No. It is collected from customers and remitted; it is a liability, not income or expense, though uncollected tax paid from the business's own funds is a cost.
Official sources
The Supreme Court held: “For these reasons, the Court concludes that the physical presence rule of Quill is unsound and incorrect. The Court’s decisions in Quill Corp. v. North Dakota, 504 U. S. 298 (1992), and National Bellas Hess, Inc. v. Department of Revenue of Ill., 386 U. S. 753 (1967), should be, and now are, overruled.” — Supreme Court of the United States, South Dakota v. Wayfair, Inc., 585 U.S. 162 (2018), https://www.supremecourt.gov/opinions/17pdf/17-494_j4el.pdf
The Florida Department of Revenue explains: “Effective July 1, 2021, Florida law requires businesses making remote sales into the state to collect and electronically remit sales and use tax, including any applicable discretionary sales surtax, on those transactions if the business has made taxable remote sales in excess of $100,000 over the previous calendar year.” — Florida Department of Revenue, Florida Sales and Use Tax, https://floridarevenue.com/taxes/taxesfees/Pages/sales_tax.aspx
Next step
Fairlight Accounting handles U.S. domestic, cross-border (U.S.–Canada), and international tax returns, plus bookkeeping, payroll, and CFO advisory. Our U.S. Tax Desk runs a nexus study by state and handles registrations and voluntary disclosures. See pricing or book a free fit call.
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