If your business sells across state lines, the sales tax nexus should be on your radar. “Nexus” is the level of activity that requires you to collect and remit sales tax in a state. Understanding where you owe tax helps you register on time and set up systems correctly.
\ After the South Dakota vs Wayfairdecision in 2018, many states created more tax regulations that apply to remote sellers. In 2025, several states refined those rules again. This guide explains what nexus is, how physical and economic nexus differ, what changed this year, and how to decide where you should register and file. It also includes practical steps to stay compliant as you grow.
What Is Nexus and Why It Matters
Nexus is the level of activity that requires you to collect and remit sales tax in a state. This is an essential factor for business owners to stay on top of, because missing a filing requirement can lead to penalties, interest, and retroactive assessments.\ \ As of 2025, many states have clarified thresholds, tightened definitions, and expanded coverage to digital goods and services. Knowing where you have nexus helps you register on time, set up systems correctly, and avoid costly cleanup later.\ \ Understanding Nexus Types: Physical vs. Economic
Physical nexus is established when your business has a concrete presence within a state. This could mean operating an office, a warehouse, storing inventory through a third-party fulfillment provider, employing staff or 1099 contractors, or even participating in events where you take orders. Any of these activities can create a tax obligation, sometimes after a single occurrence.
Economic nexus, on the other hand, arises from reaching specific sales volumes within a state, even if you never set foot there. States set their thresholds, usually based on sales dollars, transaction counts, or both.\ \ For online, SaaS, and multi-state businesses, it’s common for economic nexus to take effect once those limits are crossed. This means you may be required to collect and remit sales tax in states where you have no physical presence, solely because of your sales activities.
Why is this distinction important? The triggers for nexus can happen in different ways and at various times, depending on your specific business model.
Key 2025 Thresholds and Triggers
Nexus regulations differ from state to state, so it’s always best to consult your local or state tax department for the latest rules and guidance. That said, here are some key trends and thresholds we’re seeing for 2025:
- Common Sales Thresholds:$100,000 or $250,000 per year in many states, while a few remain at $500,000.
- Transaction Counts:Several states have removed the 200-transaction test. Where it remains, it typically pairs with a sales-dollar threshold.
- Counting Rules:Some states count gross sales, others count taxable sales or retail sales. SaaS and digital products may be taxable in one state and exempt in another.
Tip: Track thresholds by state, by year, and by product type. The details vary and can change from state to state.
\ What Changed in 2025\ In 2025, several significant changes to sales tax nexus laws have made compliance more complex for businesses that work across state lines. States continue to shift their approach based on the evolving needs of commerce and technology, and companies need to pay close attention to new rules and definitions.
Key updates include:
- Fewer Transaction Thresholds:Several states removed the “200 transactions” test, focusing on sales dollars instead. This reduces filing for high-frequency, low-dollar sellers but keeps requirements for higher revenue sellers.
- Broader Coverage for Digital Goods and Services:More states clarified that SaaS, streaming, digital downloads, and some cloud services are taxable. Definitions and sourcing rules differ, so review where customers use the service.
- Marketplace and Fulfillment Updates:States continue to refine rules for marketplace facilitator collection. If you sell through a marketplace and your inventory sits in multiple states, you may still have a physical nexus for non-marketplace sales.
- Clearer Lookback Periods and Effective Dates:States are publishing more precise guidance on when thresholds apply and how to measure prior-year sales, reducing ambiguity but requiring careful tracking.
Should I Register and File in More States?
To determine where and how to perform your nexus, start with a simple review:
- Map Your Footprint.List all states where you have inventory, staff, contractors, or events where your physical nexus may apply.
- Run a Threshold Report.For each state, compare your current and prior-year sales against the state’s economic nexus threshold and definition (gross vs. taxable sales).
- Review Product Taxability.Confirm whether your products or services (including SaaS and digital) are taxable in each state.
- Register before collecting:Don’t collect tax without a permit. If you already have nexus and missed registration, consider voluntary disclosure to limit lookback/penalties.
This is where a business tax servicecan help provide guidance. An experienced team can assess your exposure, guide registration, configure your sales channels, and set filing schedules. A business tax service also coordinates with your bookkeeping, so your returns match your records.
\ Strategies for Nexus Compliance
Keeping up with sales tax compliance may seem overwhelming, but a well-organized approach makes it manageable. Start by establishing transparent processes so you know where you stand in every state and can adapt as requirements change. Bringing together all your sales data, using reliable automation, and tracking key details throughout the year can help protect your business from missteps.
Here are some effective strategies to support your compliance efforts:
- Centralize your sales data so you can see each state and product type in one place, including marketplace and direct sales.
- Use a reputable sales tax calculation tool that integrates with your e-commerce platform and invoicing system, and keep your product tax codes up to date.
- Monitor thresholds in each state every month, and set alerts if you're nearing a threshold. Be diligent in documenting when you cross a limit and when registration is needed.
- Schedule your filings and remittances according to each state's assigned frequency. Keeping due dates on a shared calendar, with clear responsibility, reduces the risk of missing a deadline.
- Collect and securely store exemption certificates from resellers or tax-exempt customers to support any qualifying sales.
- Stay alert for changes in state tax rules and deadlines. When you work with a business tax service, you can rely on their team to notify you of important updates and adjust your filings accordingly.
Navigating Nexus with Expert Support
Sales tax rules keep evolving, and multi-state growth raises the stakes. Understanding the physical and economic nexus, tracking thresholds, and aligning product taxability will reduce risk and protect margins. Partnering with a business tax service that also manages bookkeeping creates a cleaner close each month, accurate filings, and fewer surprises at audit time.
Need help sorting out where you should register and how to file with confidence? Request a consultationwith a Bookkeeper360 tax professional to review your nexus footprint and explore tools that simplify compliance. Dedicated business tax services can save time, money, and stress while you focus on growth.
Disclaimer:This article provides general information and is not legal or tax advice. Consult your tax advisor about your specific situation.