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Why does economic nexus differ by state?

Sales tax is a state and local tax, not a federal one, so when the Supreme Court's 2018 South Dakota v. Wayfair decision let states tax out-of-state sellers based on sales volume instead of physical presence, it did not hand down one national number. Each state legislature wrote its own version. Here is why the figures land where they do and why they keep changing one state at a time.

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Where the common $100,000 figure came from

South Dakota's own law -- $100,000 in sales or 200 transactions in the current or prior calendar year -- was the specific test the Supreme Court had in front of it and found constitutionally reasonable. Most states that adopted economic nexus in the year or two after the ruling copied that figure directly rather than defend a different number of their own in court, which is why $100,000 is still the most common threshold today.

Why a few states set a higher figure

California, New York, and Texas each set $500,000 instead. All three already had large sales tax bases from physical-presence sellers before Wayfair, so a higher bar mainly excludes smaller out-of-state sellers rather than giving up meaningful revenue from the sellers a lower figure would have added. Alabama and Mississippi sit in between at $250,000.

Why the 200-transaction test is disappearing

A pure transaction count can catch a seller with trivial revenue -- 200 transactions at $10 each is $2,000 in total sales, far below any state's dollar threshold, but enough to trigger a registration obligation under a strict either/or reading. States noticed this was capturing small sellers they never intended to reach, and have been dropping the transaction-count leg one at a time since 2019: Colorado, Iowa, Indiana, North Carolina, Wisconsin, South Dakota itself, and most recently Illinois (effective 2026-01-01) now use revenue alone. Roughly a third of states still keep some form of the test, so this is an active, ongoing shift rather than a settled rule -- check the current figure for any state you're close to a threshold in.

AND versus OR: the one distinction worth knowing

In every state that still pairs a revenue figure with a transaction count, crossing either one alone is normally enough (an "OR" test) -- except Connecticut and New York, which currently require both together ("AND"). A seller who clears New York's $500,000 revenue figure but has fewer than 100 transactions has not crossed New York's threshold; a seller who clears both has.

States with no threshold at all

Alaska, Delaware, Montana, New Hampshire, and Oregon levy no general statewide sales tax, so there is no economic-nexus threshold to cross there regardless of sales volume.

Common questions

Why isn't there one national economic nexus threshold?

Sales tax is a state and local tax in the United States, not a federal one, and South Dakota v. Wayfair (2018) upheld each state's own power to define when an out-of-state seller owes it -- the Supreme Court set the constitutional floor (a state's rule has to be reasonable, and South Dakota's $100,000-or-200-transactions test was found to be), not a single number every state must use. Congress has not passed a federal standard, so each state legislature sets its own.

Why did South Dakota's original $100,000 or 200 transactions become the most common figure?

Because it was the specific test the Supreme Court had in front of it and upheld, most states that adopted economic nexus in 2018-2019 copied it directly rather than defending a new figure of their own in court. States that already had large physical-presence sales tax bases before Wayfair (California, New York, Texas) had less incentive to copy South Dakota's number and set their own higher figures instead.

Why are states removing the 200-transaction test?

The transaction-count test was flagged early as capturing small, low-dollar sellers a state never intended to reach -- 200 transactions at $10 each is $2,000 in sales, far below any state's revenue threshold, yet it still creates a registration obligation under a strict OR reading. Colorado, Iowa, Indiana, North Carolina, Wisconsin, South Dakota itself, Illinois, and others have dropped the transaction-count leg since 2019, leaving revenue as the only test -- a trend states keep following one at a time rather than all at once, which is exactly why this remains a state-by-state question rather than a settled one.

What is the difference between an AND state and an OR state?

In an OR state (most of the ones that still keep a transaction test), meeting either the revenue figure or the transaction count is enough on its own to cross the threshold. In an AND state -- currently Connecticut and New York -- a seller has to meet both the revenue figure and the transaction count together; meeting only one, however far over it, does not cross the threshold by itself.

Does a state with no sales tax have an economic nexus rule?

No. Alaska, Delaware, Montana, New Hampshire, and Oregon levy no general statewide sales tax, so there is nothing for an economic-nexus threshold to trigger. (Alaska has local sales taxes in some municipalities, administered separately from any statewide economic-nexus program.)