What Is Sales Tax Nexus? Remote Sellers and the Wayfair Decision

Sales tax nexus is the connection between a seller and a US state that lets the state require the seller to collect and remit its sales tax. Before 2018, the Supreme Court's physical presence rule meant a state couldn't make a seller collect its sales tax unless the seller was physically present in the state. In South Dakota v. Wayfair, Inc. (2018), the Court overruled that rule, so a state can now base nexus on a remote seller's sales into the state, known as economic nexus. Each state sets its own rules and thresholds, so check the revenue department of every state you sell into, and ask your accountant or a tax professional.

Billed publishes this page. It's general information, not legal or tax advice. The quotes below come from the Supreme Court's opinion in South Dakota v. Wayfair, Inc., 585 U. S. 162 (2018), published in the Court's bound volume 585 on supremecourt.gov and opened on October 30, 2026. Sales tax is set by each state, and its rules vary by state; this page gives no state's threshold.

What the Supreme Court decided

In Wayfair, the Court restated its test for state taxes on interstate commerce: "The Court will sustain a tax so long as it (1) applies to an activity with a substantial nexus with the taxing State, (2) is fairly apportioned, (3) does not discriminate against interstate commerce, and (4) is fairly related to the services the State provides."

The Court described the old rule this way: "Under this Court's decisions in Bellas Hess and Quill, South Dakota may not require a business to collect its sales tax if the business lacks a physical presence in the State." On that rule, the Court said: "For these reasons, the Court concludes that the physical presence rule of Quill is unsound and incorrect." It went on: "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."

The decision was about South Dakota's law. Each state decides whether and how to tax remote sellers, within the limits the Court described.

Physical presence and economic nexus

• Physical presence: a seller has a location, employees or property, such as inventory, in the state. Whether a given presence creates nexus depends on that state's law.
• Economic nexus: a state counts a remote seller's sales or transactions into the state, and requires the seller to register and collect once they pass the state's threshold.

What to check for each state

Rules vary by state. On each state's revenue department website, check:

• whether the threshold counts sales, transactions or both, and which sales are included;
• the period measured, such as the previous or current calendar year;
• how sales made through an online marketplace are treated;
• how to register, and when collection has to start;
• which of your products or services the state taxes.

If a state's rules are unclear for your business, ask your accountant or a tax professional.

Sample: tallying sales into one state

The state, its threshold and the figures here are a sample, invented for this example. They aren't any real state's rule.

An online shop tracks its sales into one state over a calendar year. The invented threshold in this sample is more than $50,000 of sales or 150 or more transactions in that year.

1. Sales by quarter: $9,800 + $14,200 + $16,400 + $11,900 = $52,300.
2. Transactions by quarter: 60 + 85 + 70 + 45 = 260.
3. Against the sample threshold: $52,300 is more than $50,000, and 260 is more than 150, so under this invented rule the shop would pass both measures by the end of the fourth quarter.
4. Running total: after three quarters, sales were $9,800 + $14,200 + $16,400 = $40,400, under $50,000, while transactions were 60 + 85 + 70 = 215, already past 150.

A real state's rule decides which measure counts, the period, and when registration is due. Check the state's revenue department.

Where Billed fits

Billed's invoice software page says: "Save your tax rates and settings once, and Billed calculates taxes automatically when you create invoices and estimates." It also says: "Invoice reports show which invoices are paid, partially paid or past due, and you can see who owes you money and send them a payment reminder." Billed's expense tracking page says reports "can be filtered by date range and exported for your accountant, bookkeeper or tax software." Plans are on Billed's pricing page, calculators are in the tools section, and more tax topics are in the taxes hub.

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Frequently Asked Questions

What is sales tax nexus?

It's the connection between a seller and a US state that lets the state require the seller to collect and remit its sales tax. The Supreme Court's test for state taxes asks whether the tax "applies to an activity with a substantial nexus with the taxing State".

What did South Dakota v. Wayfair decide?

In 2018, the Supreme Court said "the physical presence rule of Quill is unsound and incorrect" and overruled its decisions in Quill Corp. v. North Dakota and National Bellas Hess. After Wayfair, a state can base a remote seller's sales tax obligation on its sales into the state, within the limits the Court described.

Is there one economic nexus threshold for every state?

No. Each state sets its own rules, including what it counts and over what period, and the rules vary by state. Check the revenue department of each state you sell into.