Economic nexus after Wayfair: how accounting firms can watch clients’ state sales tax thresholds
Your client may owe sales tax in a state it has never set foot in. The question is who notices first.
| Key case | South Dakota v. Wayfair, Inc. (U.S. Supreme Court, 2018) |
|---|---|
| Common threshold | About $100,000 of sales into the state |
| Transaction tests | Many states have removed the 200-transaction test; about 15 still had one as of mid-2026 |
| What to track per client | Sales by state, the state’s threshold, measurement period, registration status |
| Responsibility | Thresholds and measurement periods vary by state; check each state’s current rule |
What changed with Wayfair?
Before 2018, a state could generally require a seller to collect its sales tax only if the seller had a physical presence there. In South Dakota v. Wayfair, the Supreme Court allowed states to base the obligation on economic activity instead. South Dakota’s law, which the Court reviewed, used a threshold of $100,000 in sales or 200 separate transactions.
Are thresholds the same in every state?
No. Each state sets its own threshold, what sales count toward it and the period it is measured over. A clear trend since 2018 has been to drop the 200-transaction test and use a sales amount alone; by mid-2026, about sixteen states had removed it. Always check the current rule for the state in question.
Which clients should you watch?
- Online sellers and marketplace sellers shipping to many states
- Wholesalers and distributors selling across state lines
- Software and digital product sellers, where states tax those products
- Any client whose sales into a new state are growing quickly
A simple monitoring routine
- Collect each client’s sales by state, monthly or quarterly.
- Record each state’s threshold and measurement period.
- Flag states where the client is approaching or over the threshold and is not registered.
- When the client registers, record the registration and set up its recurring filings.
Frequently asked questions
Does physical presence still create nexus?
Yes. Physical presence, such as an office, employees or inventory, can still create nexus; economic nexus is an additional way a state can require collection.
Do marketplace sales count toward a threshold?
It depends on the state. Many states have marketplace facilitator laws, and states differ on whether marketplace sales count toward a seller’s threshold.
Is this legal advice?
No. It is general information; check each state’s current rules or a sales tax specialist for a specific client.