Do I Have to Collect Sales Tax in Other States?

By Bill Stilwell · Last reviewed October 17, 2026

The short answer

Economic nexus means a state can require you to collect its sales tax just because you sell enough to its residents, even if you have no office or staff there. Each state sets its own limit, and many use $100,000 in yearly sales into the state. Track your sales by customer state and register in any state once you pass its limit.

What this means

“Nexus” is a connection with a state that is strong enough for the state to tax you. It used to mean a physical presence, like a store, warehouse, or employee. In 2018, in South Dakota v. Wayfair, the U.S. Supreme Court ruled that states can also require out-of-state sellers to collect sales tax based on their sales into the state. That’s economic nexus.

How it works in practice:

Each state sets a limit. Many use a dollar amount of sales into the state over the current or prior year. South Dakota, for example, uses more than $100,000 in gross sales. It dropped its old 200-transaction test on July 1, 2023. Some other states still count transactions.
Once you pass the limit, you register in that state, collect its tax on taxable sales, and file returns.
Marketplaces may collect for you. Most states have marketplace facilitator laws. These generally make a large online marketplace collect and send in the tax on sales it handles for outside sellers. Your own website sales are still on you.
Physical presence still counts. Working jobs, storing inventory, or having staff in another state can create nexus by itself.

Made-up example: Blue Heron Soap Works is based in Ohio and sells online. A year-end report shows its sales to customers in one neighboring state topped that state’s limit. The owner registers there, sets her online store to charge that state’s tax, and starts filing returns.

Why it matters

You can owe tax you never collected. If you pass a state’s limit and don’t register, that state can bill you for back tax, plus penalties and interest.
Limits are easy to pass without noticing. Online sales add up quietly.
Other taxes can follow. Activity in another state can also raise state income tax and registration questions (see 10.2.1 State Income Tax and 9.1.6 Foreign Qualification).

Who this applies to

Online and product sellers who ship to other states are the main group. Service businesses should check too, since some states tax certain services and working in a state can create nexus. If every sale and every job happens inside your home state, this likely doesn’t apply yet. Rules vary by state, so check each state’s revenue department.

How to do it

Run a report of sales by customer state for this year and last year. Most online stores and bookkeeping tools can do this.
Look up each state’s limit on its department of revenue site. Search the state name and “remote seller.”
Note whether each state counts all sales or only taxable sales, and whether marketplace sales count toward its limit.
Check physical presence too. List states where you work, store goods, or have staff.
Register in any state where you’ve passed the limit before you start collecting there.
Set up tax collection in your online store or invoicing tool for those states.
File and pay on each state’s schedule (see 10.9.1 Financial Calendar).
Repeat the sales-by-state check every quarter.

What proof to keep

Sales-by-state reports, saved each quarter
Notes on each state’s limit and the date you checked
Registrations, returns, and payment confirmations for each state
Marketplace reports showing tax the marketplace collected for you

Common mistakes

Thinking “no office there, no tax.” That changed in 2018.
Checking once and never again. Sales grow, and states change their limits.
Assuming the marketplace covers everything. It doesn’t cover sales on your own website.
Forgetting about jobs done across the state line. Physical work can create nexus on its own.
Not registering before collecting. Collecting tax without a permit creates its own problems.

When to get help from a pro

Certified public accountant (CPA) or state and local tax specialist: if you sell into many states, are close to a limit, or think you passed one in the past. Questions to ask:

Which states am I close to, or already over, the limit?
If I passed a limit in the past, what are my options for catching up?
Does selling in that state create any income tax or registration duties too?

Bill’s note

[Bill: add a short note. For example, whether SiteSmarty has clients in other states and how you checked, or an online seller you know who was surprised by an out-of-state tax notice.]

How I did this for SiteSmarty

[Date I did this:]
[What I actually did, step by step: how I pulled sales by state for SiteSmarty and what I found]
[What it cost and how long it took:]
[What surprised me or what I’d do differently:]
[Screenshot or photo to add, with private info blurred: sales-by-state report]
[Result so far:]

Questions people ask

What is economic nexus? It’s when your sales into a state are high enough that the state can require you to collect its sales tax, even without a physical presence.

What amount triggers it? Each state sets its own limit. Many use $100,000 in yearly sales into the state. Check each state’s revenue department.

Do marketplace sales count? It depends on the state. Many states have the marketplace collect tax on those sales, but some still count them toward your limit.

What do I do once I pass the limit? Register with that state, collect its tax on taxable sales, and file returns on its schedule.

Audit check

Question: Does the business track sales by customer state and register wherever it passes a state’s economic nexus limit?
Pass looks like: Quarterly sales-by-state reports. Each state’s limit noted with a date. Registered and filing in every state where required.
Fail looks like: No sales-by-state tracking. Over a state’s limit with no registration. Relying on marketplaces for website sales.
Evidence to collect: Sales-by-state reports, state limit notes, out-of-state registrations, returns, and payments.

Where this fits

Do this first: 10.2.5 Resale and Exemption Certificates

Do this next: 10.3.1 State Employer Registration

Sources

Supreme Court of the United States, Docket 17-494, South Dakota v. Wayfair, Inc. (checked October 17, 2026)
South Dakota Department of Revenue, "2023 Legislative Updates" (checked October 17, 2026)
Streamlined Sales Tax Governing Board, "Marketplace Facilitator State Guidance" (checked October 17, 2026)
SBA, "Pay taxes" (checked October 17, 2026)

This page explains general rules and Bill's own experience. It is not legal, tax, or insurance advice. Talk to a qualified professional about your situation.