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# Economic Thresholds

> **Warning**
>
> 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](../reference/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
\$100,000. A few set it higher: California and Texas 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:

| Rule shape          | How it works                                                         | Example                                                                                    |
| ------------------- | -------------------------------------------------------------------- | ------------------------------------------------------------------------------------------ |
| **Either triggers** | Crossing the dollar amount *or* the transaction count creates nexus. | Many states: \$100,000 or 200 transactions.                                                |
| **Both required**   | Nexus applies only when *both* are crossed.                          | New York: \$500,000 and 100 transactions.                                                  |
| **Sales only**      | Only the dollar amount matters.                                      | States that have removed their transaction trigger, such as Utah (effective July 1, 2025). |

The distinction matters most for sellers with many low-value orders: under an
"either" rule, 200 orders of \$10 each can create nexus at \$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.

| State(s)                                 | Threshold                                                                                           |
| ---------------------------------------- | --------------------------------------------------------------------------------------------------- |
| Most states                              | \$100,000 in sales, often paired with an "or 200 transactions" trigger.                             |
| Alabama, Mississippi                     | \$250,000 — measured on retail sales in Alabama, gross sales in Mississippi.                        |
| California, Texas                        | \$500,000 in sales.                                                                                 |
| New York                                 | \$500,000 in sales **and** 100 transactions, measured over the previous four sales tax quarters.    |
| Connecticut                              | \$100,000 in sales **and** 200 transactions, measured over the 12-month period ending September 30. |
| Delaware, Montana, New Hampshire, Oregon | No statewide sales tax, so no economic nexus threshold.                                             |

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](https://taxcloud.com/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:

| State    | Effective       |
| -------- | --------------- |
| Alaska   | January 1, 2025 |
| Utah     | July 1, 2025    |
| Illinois | January 1, 2026 |
| Kentucky | August 1, 2026  |

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.

Economic nexus is **derived from a merchant's sales activity rather than
declared**, so it is not something you record against a merchant the way you
record a [physical location](nexus-management). The `/merchant/nexus/*`
endpoints accept only `physical` on create, and listing with
`nexusType: "economic"` currently returns an empty list, because economic nexus
is not yet tracked.

## API access (planned)

A planned `POST /nexus-threshold/get` endpoint will return the same reference
data as the platform's Thresholds page. For each state it returns:

| Data point            | What it tells you                                                       |
| --------------------- | ----------------------------------------------------------------------- |
| Sales threshold       | The dollar amount of sales into the state that triggers economic nexus. |
| Transaction threshold | The transaction count, where the state uses one.                        |
| Combining rule        | How the two combine: either triggers, both required, or sales only.     |

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

#### [Nexus Management](nexus-management)

Record physical locations and crossed economic thresholds for a self-managed merchant.

#### [Self-Managed Merchants](self-managed-merchants)

Create merchants whose compliance stays outside TaxCloud while you track their nexus.

#### [Collection Requirements and Nexus](../reference/collection-requirements-and-nexus)

A broader introduction to nexus, including physical presence triggers.