Sales Tax Nexus After Wayfair: Economic Nexus, Marketplace Facilitator Laws, and Compliance

Before the Wayfair decision, a state could only require a business to collect sales tax if the business had a physical presence (office, warehouse, employee, inventory) in that state. After South Dakota v. Wayfair (2018), states can establish economic nexus based solely on the volume of sales or transactions into the state. Since then, states that impose a sales tax have adopted economic nexus standards, each with its own threshold. Many use $100,000 in sales, measured over a period each state sets, and several have eliminated the transaction threshold entirely (South Dakota in 2023, Illinois in 2026), while California, Texas and New York use $500,000. Separately, marketplace facilitator laws require online marketplaces to collect and remit sales tax on behalf of their third-party sellers, effectively shifting the compliance burden from the seller to the platform for sales made through the marketplace. For sellers who sell both through marketplaces and through their own websites, understanding which sales are covered by the marketplace facilitator and which require the seller to collect directly is critical.

How do you determine where you have nexus?

How do I know if I need to collect sales tax?

Sales tax obligations depend on nexus, a connection between your business and a state that triggers a collection requirement. Physical nexus comes from having a location, employee, or inventory in a state. Economic nexus, established after the 2018 Supreme Court decision in South Dakota v. Wayfair, triggers when you exceed a state’s revenue or transaction threshold (each state sets its own figure and period; Florida and Pennsylvania use $100,000 of sales, for example, while California and Texas use $500,000). Each state sets its own rules, rates, and exemptions. If you sell online and ship to multiple states, you likely have economic nexus in several states and must register, collect, and remit sales tax in each.

What is the difference between sales tax and use tax?

Sales tax is collected by the seller at the point of sale and remitted to the state. Use tax is owed by the buyer when sales tax was not collected, typically on out-of-state purchases or items withdrawn from inventory for personal use. As a business, you owe use tax on equipment, supplies, or inventory purchased from vendors who did not charge sales tax. Many states combine sales and use tax on a single return. Failing to self-assess use tax can result in back-tax assessments for the full statute of limitations period, typically three to four years, plus interest and penalties.

Is the 200-transaction test still part of economic nexus?

In fewer states than before. South Dakota, the state in Wayfair, dropped its 200-transaction test effective July 1, 2023, and now uses only more than $100,000 of gross sales in the previous or current calendar year. Illinois removed its 200-transaction threshold effective January 1, 2026.

Ohio’s statute still has one: more than $100,000 of gross receipts or 200 or more separate transactions in the current or preceding calendar year. New York has a count too, but it only applies together with the dollar figure, so you need more than $500,000 and more than 100 sales in the prior four sales tax quarters. California, Texas, Florida and Pennsylvania use no transaction count.

The Court in Wayfair only found that South Dakota’s law met the substantial nexus requirement. It didn’t set a national threshold, so each state’s own statute controls.

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.