Sales-Tax Nexus For Small LLCs: When You Have To Register In Another State

Updated: August 2026 · Industry Advisors · Education, not legal or tax advice.

Sales-tax nexus is the silent liability every e-commerce and remote-services LLC eventually collides with. The rules changed in 2018 and again in 2020, and most small-business guides still describe the pre-Wayfair world. Here is the current landscape in plain English.

What "Nexus" Actually Means

Nexus is the legal connection between your business and a state that gives that state the authority to require you to collect and remit sales tax. Before 2018, nexus required a physical presence — an office, employee, or inventory in the state. After the Supreme Court's South Dakota v. Wayfair decision, states can also impose nexus based on economic activity alone.

The Two Nexus Triggers

1 · Physical Nexus

The classical version. You have physical nexus if you:

• Have an employee working from the state
• Own or lease commercial or residential property in the state
• Store inventory in the state — including in a third-party fulfillment center (Amazon FBA is a major trigger)
• Have a traveling salesperson soliciting business in the state more than occasionally
• Attend trade shows in the state above a threshold (varies)

2 · Economic Nexus

The post-Wayfair layer. Most states apply one or both of these thresholds, measured on the prior calendar year:

• Revenue threshold — typically $100,000 of sales into the state (or $500,000 in the largest states like California, New York, and Texas)
• Transaction threshold — typically 200 separate transactions into the state (a handful of states have dropped this leg)

Cross either threshold and you have economic nexus — register, collect, and remit even if you have never set foot in the state.

What Triggers Surprise Nexus For Small LLCs

• Amazon FBA. Amazon moves your inventory to whichever warehouse minimizes shipping cost. Every state your goods sit in is a physical-nexus state.
• Remote employees. One remote employee in a new state creates physical nexus for sales tax, payroll withholding, and unemployment insurance simultaneously.
• SaaS sold into states that tax it. More than 20 states now tax at least some categories of software-as-a-service. If your SaaS revenue exceeds the state's economic-nexus threshold, you owe.
• Drop-shipping. Your supplier's inventory location can create nexus even if you never touch the goods.
• Marketplace facilitator laws. Marketplaces like Amazon, eBay, and Etsy now collect and remit sales tax on your behalf in most states. Good news — but you still may need to register in states where the marketplace collects, because the state wants a return filed even at $0 tax due.

The Registration Process

Once you have nexus, register in that state:

1. Register for a Sales Tax Permit (called a "seller's permit" in some states) with the state Department of Revenue.
2. Get a business license if required (some states require it separately).
3. Configure your platform (Shopify, Amazon, Stripe) to collect the correct rate on transactions to that state.
4. File returns — monthly, quarterly, or annually depending on volume.
5. Remit collected tax to the state on the same schedule.

Registration is typically free. Sales-tax automation software (Avalara, TaxJar) handles the calculation and filing for a monthly fee once you cross more than 3–5 states.

What Happens If You Don't Register

State auditors have gotten better at cross-referencing marketplace data with tax returns. Common consequences of ignoring nexus:

• Back tax owed. The state can go back 3–8 years and assess the sales tax you should have collected.
• Penalties. Typically 25–50% of the back tax, plus interest.
• Personal liability. Sales tax is a "trust fund" tax — you collect it on behalf of the state. Corporate-veil protection does not typically shield owners from personal liability for unremitted trust-fund taxes.
• Voluntary Disclosure Agreements (VDAs). Most states offer VDA programs that limit the look-back period (typically 3–4 years) and waive penalties if you approach the state before they find you. Talk to a sales-tax professional before filing back returns in more than one state.

The Small-LLC Pragmatic Approach

For an LLC doing less than $500K/year in revenue, most states are safe to ignore under the economic-nexus threshold. Focus your nexus tracking on:

1. Your home state — always required from day one
2. Any state where you have an employee or contractor
3. Any state where your inventory sits (check your fulfillment vendor's warehouse map)
4. The 3–5 states you sell into most heavily — monitor revenue against the economic-nexus threshold at each quarter close

Once revenue passes $500K/year, the calculus flips — sales-tax software becomes worth the fee, and a nexus study from a specialist ($1,500–$5,000 est.) pays for itself in penalty avoidance.

The Everyday Owner's Blueprint includes a nexus-trigger checklist, a state-by-state economic-nexus threshold table, and templates for tracking multi-state obligations.

Industry Advisors · 30 Wall Street, New York, NY 10005. Education, not legal or tax advice.