Sales Tax Nexus Explained: What Every Business Owner Needs to Know in 2025

TLDR: Sales tax Nexus is what determines where your business must collect and remit sales tax. You can trigger Nexus through physical presence (like inventory or offices) or economic activity (like $100K in sales to a state). Each state has its own rules. To avoid penalties and stay compliant, track where you’re selling and let doola handle registrations, filings, and compliance.

What Is Sales Tax Nexus?

Sales tax Nexus is the connection between your business and a state that requires you to collect and remit sales tax there. If you meet the criteria for Nexus in a given state, you’re legally obligated to register for a permit and start collecting sales tax from customers in that state.

Two Types of Nexus: Physical and Economic

There are two main ways your business can establish Nexus:

Physical Nexus

You have physical Nexus in a state if your business has a tangible presence there. This includes:

• Warehouses
• Offices
• Employees
• Inventory storage

For example, if you’re an Amazon FBA seller and your inventory is stored in fulfillment centers across multiple states, you likely have physical Nexus in each of those states.

Economic Nexus

Even if your business has no physical footprint in a state, you can still trigger sales tax obligations through economic Nexus. This happens when you exceed a certain threshold of sales or transactions within that state.

Common thresholds:

• $100,000 in annual revenue
• 200 transactions in a calendar year

For instance, if your Shopify store makes over $100,000 in sales to California customers, you’ll need to register for sales tax there—even without a warehouse or office in the state.

Why Understanding Nexus Is Critical

Every state has slightly different rules for determining Nexus. Some may have lower or higher thresholds, or different criteria entirely.

Failing to comply with Nexus-based obligations can lead to audits, back taxes, penalties and interest, and disruptions to your business

This is why it’s essential to proactively monitor your sales data and stay ahead of state-specific requirements.

How doola Helps You Navigate Nexus and Compliance

Tracking sales tax obligations across states is complex—but doola makes it simple. Here’s how we help:

• Identify where you have Nexus (physical or economic)
• Register for sales tax permits in required states
• Manage filings and deadlines
• Automate the full compliance process
• Help you stay audit-ready as you scale

Whether you sell on Amazon, Shopify, or both, doola ensures you’re covered.

Book a free demo and get clarity on your tax obligations.

FAQs

What is sales tax Nexus?

Sales tax Nexus is the business connection that creates a legal obligation to collect and remit sales tax in a particular state.

What is the difference between physical and economic Nexus?

Physical Nexus is based on physical presence (like warehouses or employees). Economic Nexus is based on sales volume or transaction count within a state.

What are the most common Nexus thresholds?

Most states set economic Nexus at either $100,000 in sales or 200 transactions per year, though thresholds vary.

How do I know if I’ve triggered Nexus?

You need to monitor your sales and fulfillment activity by state. Tools like doola can automate this process and alert you when you hit Nexus thresholds.