Updated: Dec 16, 2025 By: Marios
Starting an online business can feel like freeing yourself from the chains of operational oppression. Without a physical space, your company needn’t look, act, or operate in a certain way to secure success. You can also save yourself substantial amounts on outlays like physical rent and all associated bills. Historically, e-commerce companies were also able to avoid physical state-based sales tax. However, the introduction of Nexus tax in 2018 put a stop to that.
Now, e-commerce companies are also fully liable to pay sales tax. Unfortunately, state-specific tax requirements can be tough to get your head around when you’re operating without a physical base. That’s why we’ve put together this complete guide about what sales tax nexus actually is, how it applies across states, and how you can be sure to comply.
What is Sales Tax Nexus?
Sales tax nexus basically refers to the connections online companies have in each state, and therefore their responsibility to collect and remit sales tax in those locations. You ‘create nexus’ with an online company when you reach a certain sales threshold in a location, develop some sort of physical state presence, or employ locals within a state. Some types of nexus are even created when you work with in-state third-party sellers.
A State-by-State Guide
Nexus tax isn’t an easy thing to understand, and it’s made all the more complex by state-specific variables. Every state requires some degree of nexus tax, apart from Delaware, New Hampshire, Montana, and Oregon, which have no sales tax at all. Businesses operating across different states will need to understand all state specifics to stay compliant, which is a daunting but not impossible task.
Luckily, these rules do tend to carry some commonalities. For instance, tax thresholds in areas like Alaska, Colorado, and Florida tend to be around the $100,000 mark, though that rises significantly in states like California, where the economic nexus threshold is $500,000. You’ll need to pay Florida sales tax at a rate of at least 6% if you own, rent, or lease property in the state. Kansas considers sellers to have a state nexus if they sell at local events. Most states will also charge additional shipping tax, though exemptions do exist in Illinois for certain invoices.
Really, your best option here is to do your research. That way, you’ll know exactly what’s what in all relevant states.
How to Comply
Complying with sales tax nexus rules is essential for your ability to operate as an online seller nationwide, but with so many variations, how can you possibly keep on top? Ultimately, research will always be your best option here, as it ensures you always know where nexus applies. From there, you should register for a sales tax permit with each state’s local tax authority, and be sure to collect the appropriate sales tax on all taxable sales. And, of course, file those tax returns regularly and remit those taxes to avoid legal hot water in the states that you rely on for sales!
