The 3-Minute Cheat Sheet: Nexus in 2026
Don’t have time for a deep dive? Here is the essential breakdown:
- Physical Nexus: If you have an office, an employee, or inventory (like in an Amazon FBA warehouse) in a state, you have Nexus. Period.
- Economic Nexus: If you sell over a certain dollar amount (usually $100,000) or a certain number of transactions into a state, you have Nexus: even if you’ve never set foot there.
- The 2026 Simplified Rule: More states (like Alaska and Utah) have recently ditched the “200 transactions” rule. They now only care about your total sales revenue.
- Registration is Mandatory: Once you hit Nexus, you must register for a Sales Tax Permit before you start collecting tax.
- International Sellers are NOT Exempt: Being based in the UK, Europe, or China does not protect you from US state tax laws.
Physical Nexus: The “Hidden” Trap for FBA Sellers
Physical Nexus is the traditional form of tax connection. It is triggered by having a tangible presence in a state. For most modern digital businesses, this isn’t about having a shiny office on Wall Street; it’s about where your stuff is kept.
If you utilize third-party logistics (3PL) or Amazon FBA, your inventory is spread across multiple states. Every state where your inventory is stored constitutes a Physical Nexus. This is why many international sellers find themselves needing to register for sales tax in the USA in ten or more states simultaneously.
Common Physical Nexus Triggers:
- Inventory: Stocking products in a warehouse (owned or 3PL).
- Personnel: Having remote employees, contractors, or even sales reps traveling through a state.
- Affiliates: Using people in a state to advertise your products in exchange for a cut of the profits.
- Trade Shows: Attending and selling at events in certain states can trigger temporary Nexus.
Economic Nexus: The 2026 Regulatory Landscape
Economic Nexus is a newer concept, born from the 2018 Wayfair vs. South Dakota Supreme Court decision. It allows states to tax businesses based solely on their economic activity within the state.
As of March 2026, almost every state with a sales tax has an Economic Nexus law. However, the “thresholds”: the point at which you are forced to comply: are changing.
Major Updates for 2025-2026
Recent legislative sessions have seen a trend toward simplification. States realized that tracking transaction counts (e.g., the “200 transactions” rule) was a nightmare for small businesses and tax authorities alike.
- Alaska (Remote Seller Sales Tax Commission): Effective January 1, 2025, the 200-transaction trigger was eliminated. Now, you only trigger Nexus if your sales exceed $100,000 in the state.
- Utah: Following Alaska’s lead, Utah repealed its transaction-based trigger on July 1, 2025. Compliance is now strictly based on the $100,000 sales threshold.
- The “Big Three” Thresholds: California, Texas, and New York remain at a high $500,000 threshold. If you are a growing SME, you might find you hit Nexus in smaller states with $100,000 limits long before you hit the “Big Three.”
Why International Sellers Often Get It Wrong
Many international entities: from UK Limited companies to Australian PTYs: assume that US Sales Tax doesn’t apply to them because they are “foreign.”
This is a dangerous misconception. The US does not have a national VAT system. Instead, it has over 11,000 local taxing jurisdictions. State departments of revenue are increasingly aggressive in identifying non-compliant international sellers.
If you exceed a threshold and fail to register, you are still liable for the tax you should have collected. This comes out of your profit margin, plus hefty penalties and interest. For many, this is the difference between a successful expansion and a total financial loss.
The Compliance Checklist: 4 Steps to Safety
Staying compliant doesn’t have to be a full-time job if you follow a structured approach.
1. Nexus Study
You cannot fix what you don’t measure. You must analyze your trailing 12 months of sales by state. Identify where you have inventory and where your sales volume is approaching state thresholds ($100k is the standard “danger zone”).
2. Registration
Do not collect tax without a permit. It is illegal to charge “Sales Tax” to a customer if you aren’t registered with the state to remit it. Ensure all “Doing Business As” (DBA) and entity details are correct during the registration process.
3. Collection Settings
Once registered, you must update your sales channels (Amazon, Shopify, Walmart, etc.) to begin collecting the correct tax rates from customers.
4. Ongoing Filing
Collection is only half the battle. You must then file returns: monthly, quarterly, or annually: depending on your volume. This requires consistent execution of filings based on your sales data.
Frequently Asked Questions (FAQ)
What is the most common sales tax threshold?
Most states use a threshold of $100,000 in gross sales. While many previously used 200 transactions as a secondary trigger, recent legislative changes in Alaska (effective January 1, 2025) and Utah (effective July 1, 2025) have eliminated transaction-based thresholds in favor of sales-only calculations.
