The Tool Desk
Outbyte PC Repair FREERepair Windows errors before they cause bigger problemsFix Now →Outbyte Driver Updater FREEScan for outdated or missing drivers - takes under a minuteDriver Scan →Whether you must collect sales tax on online orders depends on where your business has a physical presence, whether you meet a destination state’s economic-nexus threshold, and what that state counts toward the threshold. There is no single nationwide rule: thresholds and marketplace requirements differ, and a marketplace collecting tax on its sales does not necessarily handle your other obligations.
What “internet sales tax” means for an online seller
The practical issue is generally a state’s sales and use tax on products or services delivered to customers there. A seller without physical presence in a state may still have to register and collect once it establishes economic nexus under that state’s law. Physical presence can independently trigger a duty to register, even when sales are low. Streamlined Sales Tax describes physical presence and economic nexus as separate bases for seller obligations.
Keep two questions separate: whether you have a duty to collect in the state, and whether a particular product, service, or transaction is taxable there. Crossing a nexus threshold does not make every sale taxable; the state’s taxability rules determine which sales are subject to tax.
Which states require online sellers to collect?
States with sales taxes generally have rules that can require remote sellers to collect, but the trigger and scope vary. The Streamlined Sales Tax (SST) state summary gives examples of different threshold formulations; it is a starting point, not a complete or independently state-verified list. State law and the relevant revenue department’s current instructions control.
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| State | Threshold example in the SST summary | What to check before relying on it |
|---|---|---|
| Alabama | More than $250,000 in tangible personal property sales during the prior calendar year. | Confirm the current threshold, sales base, and any state-specific conditions with Alabama’s revenue department. |
| California | $500,000 in combined sales. | Confirm how California defines and measures the sales included in the threshold. |
| New York | More than $500,000 in receipts and more than 100 sales during the preceding four sales-tax quarters. | Both the receipts and transaction tests matter; confirm the current measurement period and definitions. |
| Texas | $500,000 or more of total Texas revenue during the preceding 12 calendar months. | Confirm what revenue is included and the applicable registration and collection timing. |
| Illinois | Effective January 1, 2026, the summary states $100,000 or more in cumulative gross receipts from Illinois sales of tangible personal property. | Check current Illinois guidance and how the state defines gross receipts for the threshold. |
| Alaska | Effective January 1, 2025, the summary states statewide gross remote sales of at least $100,000 in the previous or current calendar year. | Confirm the current rule and the applicable local collection requirements. |
| Utah | More than $100,000 in gross revenue, effective July 1, 2025. | Confirm the current threshold calculation and timing with the state. |
These examples are reported in the SST state summary, whose entries have different effective or update dates and whose guidance does not override state law. Do not treat the figures as a current nationwide state list. Before registering or deciding not to collect, check the relevant state revenue department’s latest instructions.
What sales count toward an economic-nexus threshold?
Read the actual threshold wording, not just its dollar amount. A state may measure gross receipts, gross sales, retail sales, taxable sales, or another defined base; it may use a current or prior calendar year, a rolling 12-month period, or sales-tax quarters. Some laws also include a transaction-count test. The SST threshold guidance notes that the terms are not interchangeable.
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- Gross-sales threshold: SST explains that where a state uses gross sales, sales into the state may include resale sales and other exempt or nontaxable sales. Its example is a hypothetical business with $400,000 in gross sales even though only $95,000 is taxable; this illustrates the terminology, not a rule that applies in every state.
- Retail-sales threshold: SST says its SSUTA definition excludes sales for resale, while sales exempt through an exemption certificate or product exemption may still count. The state’s own definition and calculation method govern.
- Marketplace transactions: A state may count marketplace sales differently from direct sales for the seller’s threshold. Check the state’s treatment rather than assuming marketplace orders are excluded or included.
Does a marketplace collect tax for its sellers?
Marketplace-facilitator laws may require a marketplace operator to collect and remit tax on transactions it facilitates. That collection does not automatically remove a marketplace seller’s registration or filing duties. State rules vary on whether marketplace sales count toward the seller’s threshold and how the seller reports them.
If you also sell through your own website, by phone, or through another channel, track those direct sales separately. They may create a collection duty when they meet the state threshold; physical presence may create a duty independently. Review both the marketplace’s seller guidance and the state’s own rules.
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How to determine and meet your obligations
- Map physical presence. Identify states where you have inventory, employees, offices, or other business presence. A physical-presence obligation may apply independently of sales volume.
- Track sales by state, period, and channel. Separate direct website sales, marketplace transactions, and other channels. Compare them with each state’s threshold period, sales base, transaction test, and marketplace rules.
- Determine what is taxable. Check state treatment of your products and services, including exemptions. A nexus threshold answers whether collection may be required; it does not decide which transactions are taxable.
- Register and set the collection start date. Use the relevant state’s registration process. SST’s registration guidance says the collection and remittance start date is selected for each state and can differ by state; follow the date and instructions applicable to your registration.
- Set up collection, returns, and remittance. Apply the required rates, collect tax on taxable transactions, file required returns, and remit on time. Keep records that support your calculations and filings, and respond to state notices or audits.
- Recheck the rules. Threshold amounts, definitions, effective dates, and filing requirements can change. Revisit state revenue department guidance periodically and when your sales or operations change.
SST identifies rate determination, tax calculation, return filing, remittance, and handling notices or audits as compliance tasks. It also describes certified service provider software as a possible form of support; whether to use a provider depends on your business needs.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How to use state summaries safely
A multistate summary is useful for spotting where to investigate, but it cannot resolve every seller’s facts or replace a state’s law and official instructions. For a state where your sales or physical presence may create a duty, verify the threshold, sales base, marketplace treatment, registration deadline, and filing frequency with that state’s revenue department. If the result is unclear or the exposure is significant, seek advice from a qualified tax professional.
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As a measure of scope—not of how many sellers owe tax—SST reported 35,632 active registrations in its registration system as of August 31, 2026. It also reported that 29.2% of businesses registered through that system contract with a certified service provider. Those figures describe SST’s system, not all businesses subject to economic nexus.
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