When do I have to start collecting sales tax in another state?

You’re required to collect sales tax in another state once you have nexus there. Nexus is triggered two ways, by your physical presence in the state, or by crossing a sales volume threshold (called economic nexus). Physical nexus creates an obligation immediately. Economic nexus creates an obligation once you hit the threshold, with a short window to register before your first collection is due.

The two triggers for a collection obligation

1. Physical nexus, effective immediately

If you have a physical presence in a state, your collection obligation starts the day that presence begins. Physical nexus is triggered by:

• Employees or contractors working in the state (including remote workers you hire)
• Inventory stored in the state, including FBA inventory in Amazon warehouses or goods held at a third-party logistics (3PL) facility
• An office, warehouse, or retail location you lease or own
• Attending a trade show or pop-up with sales activity in the state

There’s no threshold with physical nexus, one full-time remote hire or one pallet of inventory sitting in an out-of-state warehouse is enough. And there’s no grace period: the obligation starts on day one.

2. Economic nexus, triggered by crossing a sales threshold

Economic nexus is the more common trigger for ecommerce sellers who don’t have physical operations in other states. Since the Supreme Court’s 2018 South Dakota v. Wayfair decision, every state with a sales tax can require out-of-state sellers to collect once their sales into that state exceed a threshold.

The standard threshold is $100,000 in sales in a calendar year. Most states use this figure. California is the major exception at $500,000. A few states still include a transaction count component (typically 200 transactions), but many have dropped that element, sales volume alone now determines nexus in most states.

Once you cross the threshold in a given state, you need to register for a sales tax permit there and begin collecting on future sales.

Timing: when exactly does your obligation start?

This is where sellers get tripped up. Crossing a threshold doesn’t mean you owe tax on the sale that pushed you over, it means you need to start collecting on future sales to that state. But exactly when “future” begins depends on the state.

Three common rules:

Rule	What it means	States using it
Next transaction after crossing	Your obligation starts immediately, collect on the very next sale	Some states (aggressive enforcement posture)
First day of the following calendar quarter	You have a buffer until the quarter resets	Common in SST member states
First day of the following month	30-day-ish grace period to register	Several states

The safest practical guidance: treat your obligation as beginning the first day of the following month after you cross the threshold, and register before that date arrives. If you need more time, the first day of the following quarter is a defensible position in most states. Do not assume you have a full year.

What counts toward the threshold?

This matters if you sell through multiple channels:

• Your own website or store: always counts
• Amazon FBA sales: counts in most states. Even though Amazon collects the tax, those sales still accumulate toward your nexus threshold in states where marketplace sales are included in the economic nexus calculation. As of 2026, most states do count marketplace-facilitated sales toward the threshold.
• Etsy, Walmart Marketplace, TikTok Shop: same logic as Amazon: the marketplace collects the tax, but the sales typically count toward your threshold
• Wholesale / B2B sales: generally counts unless the state specifically exempts certain sale types

If you sell across Amazon, Shopify, and Etsy simultaneously, you need to aggregate all three channels when calculating your threshold exposure in each state.

The registration window

Once you determine you’ve crossed a threshold, here’s what the clock looks like:

1. Identify the crossing date: the date your cumulative sales into that state hit $100,000 (or the state’s specific threshold) for the calendar year
2. Determine your obligation start date: first of the following month is the safest default; check the specific state’s rules
3. Register before that date: most states process registrations within 2–4 weeks; a few take longer. Don’t wait until the day before.
4. Configure your store to collect: once your permit is active, turn on collection in your ecommerce platform or tax software for that state
5. Begin collecting on new orders: you’re not retroactively liable for tax you should have collected from the moment you crossed but didn’t, as long as you get registered promptly. Significant delays create retroactive exposure.

A note on California

California uses a $500,000 threshold (five times the standard) which means many mid-market ecommerce brands that have nexus in 20+ other states don’t have economic nexus in California yet. But California still applies physical nexus rules, so if you have FBA inventory there (common with West Coast fulfillment centers), you likely have nexus regardless of sales volume.

What to do if you’re already past the threshold

If you’ve been selling into a state above the threshold and haven’t been collecting, you have retroactive exposure. The cleanest path is usually a Voluntary Disclosure Agreement (VDA): a process most states offer that caps your lookback period and waives penalties in exchange for coming into compliance. Registering on your own without a VDA can expose you to a longer lookback window and full penalty liability.

Related: What is a VDA, and when should I use one? | How do I prioritize states if I have retroactive exposure in multiple places?