Economic Thresholds
How state economic nexus thresholds work, and how to track them for your self-managed merchants.
Available as a Private Preview feature. Contact support@zip.tax to gain access.
This page is a general overview, not tax advice. It describes reference data: thresholds and rules change, and whether a specific merchant has crossed a threshold often depends on facts and circumstances. Confirm current requirements directly with the state or with a qualified tax professional before acting.
Every US state with a sales tax sets an economic nexus threshold: a level of sales activity into the state that, once crossed, obligates a remote seller to register and collect sales tax there. This page explains how those thresholds are constructed and how to record them for your merchants in Ziptax. For a broader introduction to nexus, including physical nexus triggers, see Collection Requirements and Nexus.
A note on terms: economic nexus is the legal concept, and Economic Thresholds is the Ziptax feature for recording where a merchant has crossed one. This page uses each accordingly.
What economic nexus is
In South Dakota v. Wayfair (2018), the US Supreme Court ruled that a state can require a remote seller to collect its sales tax based on economic activity alone, with no physical presence in the state. Every state with a sales tax has since adopted an economic nexus law: once a seller’s sales into the state cross the state’s threshold, the seller must register, collect, and remit.
Economic nexus differs from physical presence in one important way. Physical presence — an office, an employee, inventory in a warehouse — creates nexus immediately, with no dollar minimum. Economic nexus only applies once sales activity crosses the state’s threshold, so a seller can ship into a state for years without an obligation, then cross the threshold in a single strong quarter.
Anatomy of a threshold
A state’s economic nexus rule is more than a single dollar amount. Five components determine whether a given merchant has crossed it.
Sales threshold
The dollar amount of sales into the state that triggers nexus. Most states use 500,000.
Transaction rule
Some states pair the dollar amount with a transaction count, or historically replaced it with one. The rules come in three shapes:
The distinction matters most for sellers with many low-value orders: under an “either” rule, 200 orders of 2,000 in sales; under a sales-only rule, they cannot.
Includable sales
States differ on which sales count toward the threshold:
- Gross sales: all sales into the state, including exempt and resale transactions.
- Retail sales: excludes sales for resale.
- Taxable sales: only sales that would actually be taxed.
The same revenue can put a seller over the threshold in one state and under it in another. Alabama and Mississippi both use a $250,000 threshold, for example, but Alabama measures it on retail sales while Mississippi measures it on gross sales.
Marketplace inclusion
When a seller also sells through a marketplace facilitator (which typically collects tax on the seller’s behalf), states differ on whether those marketplace sales count toward the seller’s own threshold. Some states include them, others exclude them, so a seller’s direct sales alone may not tell the whole story.
Measurement period
The window over which sales are counted. Most states measure the previous or current calendar year, but not all:
- New York measures the previous four sales tax quarters.
- Connecticut measures the 12-month period ending September 30.
A seller evaluating a state must apply that state’s period, not a generic trailing twelve months.
Notable thresholds
The table below is illustrative, not exhaustive. It shows the common pattern and the states that depart from it most.
For the full, current list:
- In the Ziptax platform: the Thresholds reference (Compliance > Thresholds) lists every US state’s sales threshold, transaction rule, includable sales basis, marketplace inclusion, and measurement period.
- On TaxCloud’s blog: Sales Tax Nexus by State covers economic thresholds and physical nexus triggers state by state.
Recent and upcoming changes
The clear trend is states dropping the transaction-count trigger and moving to sales-only rules, which stops small sellers with many low-value orders from triggering nexus on volume alone. Recent and scheduled removals of the 200-transaction trigger:
Because rules keep moving, treat any threshold list — including the one above — as a snapshot, and verify against the state before acting.
Tracking thresholds for your merchants
Ziptax publishes the threshold reference data described above, but it does not monitor a merchant’s sales against those thresholds or enforce them. Watching sales activity and deciding when a threshold has been crossed remains your platform’s or the merchant’s responsibility.
When a self-managed merchant does cross a threshold in a state, record it as an economic threshold entry on that merchant so the platform reflects their nexus footprint. See Nexus Management for the workflow. Each entry covers a US state and can optionally carry the merchant’s state tax registration ID once they register.
API access (in development)
The Thresholds API is in development. Endpoint names and schemas may change before release. Contact support@zip.tax for early access.
A planned POST /nexus-threshold/get endpoint will return the same reference
data as the platform’s Thresholds page. For each state it returns:
An optional state filter narrows the response to a single state; without it, the endpoint returns all states. Details are subject to change until release.
Related
Record physical locations and crossed economic thresholds for a self-managed merchant.
Create merchants whose compliance stays outside TaxCloud while you track their nexus.
A broader introduction to nexus, including physical presence triggers.