Running an online business means your products can reach customers in every corner of the country—but that also means you may owe taxes in more than one state. Understanding where your business has sales tax nexus is critical to staying compliant, avoiding penalties, and building a scalable eCommerce operation.
This guide from The Online Seller CPA explains how to identify nexus, what triggers it, how to use an income tax nexus by state chart, and what steps to take once you know your obligations.
In tax terms, nexus means a business connection between your company and a state.
If a state determines that your business has enough presence—physical, economic, or digital—it can legally require you to collect and remit sales tax and possibly pay income tax there.
Nexus laws vary across the U.S., but they generally fall into three major categories:
Physical Nexus – Triggered when you have a tangible presence in a state, such as an office, retail store, warehouse, or employees. Even storing inventory in a fulfillment center like Amazon FBA can create physical nexus.
Economic Nexus – Triggered when your sales or transaction volume in a state crosses a certain threshold, usually $100,000 in sales or 200 transactions per year.
Affiliate or Click-Through Nexus – Occurs when you partner with in-state affiliates or advertise through links that generate sales from residents of that state.
Since each state has its own definition and thresholds, determining your nexus footprint is not always straightforward.
After the 2018 South Dakota v. Wayfair Supreme Court ruling, states were given authority to enforce economic nexus laws on remote sellers. That means even if your business doesn’t have a physical presence in a state, you might still owe sales tax based on your economic activity there.
Failing to comply with nexus obligations can result in:
Back taxes and penalties
Interest on unpaid sales tax
Loss of business licenses or reseller certificates
State audits that can go back several years
For eCommerce brands selling nationwide, nexus management is as important as inventory tracking or advertising analytics.
Use the following steps to systematically determine where your business has nexus obligations:
Start by exporting your sales data from your eCommerce platform (Shopify, Amazon, Etsy, etc.). Identify which states generate the most orders and revenue.
If you have a warehouse, store, or employees in a state—even temporary contractors—it creates physical nexus. Fulfillment centers like Amazon or ShipBob count too.
Compare your annual revenue and transaction volume in each state to its economic nexus threshold.
For example:
Florida: $100,000 in sales
California: $500,000 in sales
New York: $500,000 in sales and 100 transactions
Because thresholds and filing requirements vary widely, use an income tax nexus by state chart to see which states require business income tax, franchise tax, or sales tax registration.
This chart is a critical tool for mapping your tax exposure and helps you visualize which states you must file in based on your business model.
If you sell through third-party platforms (Amazon, Walmart, eBay), know that some states hold marketplaces responsible for collecting and remitting sales tax—while others still hold the seller liable. Always confirm which model applies to you.
Every state’s Department of Revenue has its own interpretation of nexus. A CPA who specializes in online seller taxation, like The Online Seller CPA, can analyze your sales, map your nexus exposure, and guide you on registration and compliance.
Once you know where you have nexus, follow these steps to stay compliant:
Register for Sales Tax Permits – Before collecting sales tax in a new state, register with that state’s tax authority.
Set Up Correct Tax Collection Settings – Update your eCommerce platform (Shopify, Amazon, etc.) to collect the correct sales tax automatically.
File and Remit on Time – Most states require monthly or quarterly filings. Late filings can incur penalties, even if no tax is due.
Track Ongoing Changes – States often adjust thresholds and definitions of nexus. Review your income tax nexus by state chart quarterly to stay up to date.
“I only sell online, so I don’t have nexus.”
False. Economic nexus applies even without a physical presence.
“My marketplace handles everything.”
Not always. Some marketplaces handle collection, but not income tax filing.
“I can ignore smaller states.”
Dangerous assumption—states actively monitor remote sellers and share sales data through nationwide reporting systems.
Sales tax nexus deals with collecting tax on transactions, but income tax nexus focuses on where your business profits are taxed.
Even if you don’t owe sales tax in a state, you might still owe income tax there if your operations meet the state’s nexus criteria.
For example:
States like Texas and Florida do not have personal income tax but may have franchise or gross receipts taxes.
States like New York, California, and Illinois enforce both income and sales tax nexus rules.
Consulting an updated income tax nexus by state chart helps you determine where to file business income returns and estimate your tax liabilities accurately.
Avalara & TaxJar Nexus Tools: Track sales thresholds automatically.
State Department of Revenue Websites: Verify registration requirements.
The Online Seller CPA Nexus Tracker: (Custom advisory service) We review your data, assess where nexus exists, and handle multi-state compliance from registration to filing.
Navigating sales tax nexus alone can be overwhelming. At The Online Seller CPA, we specialize in helping eCommerce sellers, Amazon FBA merchants, and digital entrepreneurs stay compliant in all 50 states.
Our services include:
Nexus analysis and reporting
Multi-state tax registration
Sales tax filing and remittance
Income tax preparation by state
Ongoing compliance monitoring
Whether you sell through Amazon, Shopify, Etsy, or your own website, we simplify your tax obligations so you can focus on growing your business.
Determining where you have nexus is no longer optional—it’s a crucial part of running a compliant online business in 2025 and beyond.
By using an income tax nexus by state chart, tracking your economic thresholds, and working with experienced professionals like The Online Seller CPA, you can stay ahead of ever-changing tax laws and avoid unnecessary risks.
Take control of your personal finances—without the stress.
© 2025 The Online Seller CPA. All rights reserved.
