What sales tax nexus actually means
Nexus is the connection between a seller and a state that is strong enough for the state to require the seller to collect and remit sales tax. For decades that connection meant a physical presence: a store, a warehouse, an employee. In 2018 the Supreme Court changed the rules in South Dakota v. Wayfair,[1] holding that a state may also require collection based purely on economic activity, with no physical presence at all.
The result is two parallel tests. You can trigger nexus the old way (physical presence) or the new way (economic activity above a threshold). Either one obligates you. Most remote and online sellers run into the economic test first, so that is where to start.
Economic nexus thresholds, state by state
Every state with a sales tax now sets an economic nexus threshold, and it is measured on your sales into that state, not your total US sales. Most states use 100,000 dollars in annual sales, sometimes paired with a transaction count such as 200 orders. California, Texas, and New York set the dollar threshold at 500,000; Alabama and Mississippi at 250,000.
The combination logic matters. Most states trigger nexus if you exceed the sales threshold or the transaction count, so a low-price, high-volume seller can hit 200 transactions long before 100,000 dollars. A handful, notably Connecticut and New York, require both. Many states have repealed the transaction test in recent years, leaving a dollar threshold only. Our economic nexus checker evaluates a state against your numbers and lists every state's current threshold.
Physical nexus still counts
Economic nexus did not replace physical nexus, it added to it. Inventory stored in a state creates physical nexus even if you never set foot there, which is why third-party fulfillment (an Amazon FBA warehouse, for example) can create obligations in states you did not choose. Employees, contractors in some states, offices, and owned equipment do the same.
So the full question is: in which states do I have physical presence, and in which have I crossed the economic threshold? The union of those two lists is where you owe collection.
What to do once you have nexus
Having nexus is not optional to act on. In each state where you have it, you register for a sales tax permit, begin collecting the correct rate at checkout, and file returns on the schedule the state assigns. Collecting without registering is itself a problem, and so is registering and then failing to file a zero return. The register, collect, file guide walks through that lifecycle.
Charging the right amount is its own challenge, because the rate is the state base plus local district taxes that vary by address. The US sales tax calculator shows the state portion, and the state vs local guide explains the rest.
Tracking nexus in Odoo
Watching dozens of state thresholds by hand does not scale. Connected to a tax engine such as Avalara, Odoo monitors your sales per state, warns you as you approach a threshold, applies the correct combined rate once you register, and supports return filing. Octura sets up and validates that integration, including the tax-code mapping and account reconciliation behind it.
Read: Odoo accounting workflows with Avalara →References
- Supreme Court of the United States, South Dakota v. Wayfair, Inc. (2018). The decision that allows states to impose economic nexus. supremecourt.gov/opinions/17pdf/17-494_j4el.pdf
- Avalara, state-by-state guide to economic nexus laws. Current dollar and transaction thresholds per state. avalara.com/.../state-by-state-guide-economic-nexus-laws
- Streamlined Sales Tax Governing Board. Multistate registration and simplification program for remote sellers. streamlinedsalestax.org