Do you need a sales tax permit?
You need a sales tax permit in any state where you have "nexus," a legal connection to that state. That happens two ways: physical presence (an office, employee, warehouse, or inventory there), or economic nexus, which kicks in once your sales into that state cross its dollar threshold, commonly $100,000 a year (some states also count 200 separate transactions). Cross the line and you must register with that state, then collect and remit sales tax on taxable sales there, even if you never set foot in it. If you only sell through Amazon, Etsy, or a similar marketplace, that platform usually collects the tax for you under "marketplace facilitator" laws, so you may not need to register at all for those sales.
Do I need a sales tax permit?
You need one in every state where you have nexus and sell something taxable. For most small businesses that starts with your home state: if you operate there, you almost certainly have physical nexus and need a permit before you make your first taxable sale. Beyond your home state, you only need a permit once you either open a physical footprint there (an office, a warehouse, inventory stored in an Amazon FBA facility, a remote employee) or cross that state's economic nexus threshold from remote sales. A sales tax permit, also called a seller's permit or sales tax license depending on the state, is what lets you legally collect tax from customers and hands you a filing number to remit it to the state. Operating without one where you owe tax is a compliance problem, not a paperwork technicality: the state can pursue you for the uncollected tax plus penalties.
What is economic nexus?
Economic nexus is a rule that a state can require you to collect its sales tax based purely on how much business you do there, with no physical presence required. It exists because of a 2018 U.S. Supreme Court case, South Dakota v. Wayfair, Inc. Before that ruling, a state could only make you collect its sales tax if you had a physical presence there (a rule from a 1992 case, Quill Corp. v. North Dakota). Wayfair threw that out. The Court upheld a South Dakota law that required any out-of-state seller doing more than $100,000 of sales, or 200 or more separate transactions, into South Dakota in a year to register and collect its sales tax, even with zero employees or property in the state. Every state with a sales tax has since adopted its own version of an economic nexus law.
Do I have to collect sales tax in every state?
No. You only have to collect in a state once you have nexus there, either physical or economic. Nexus is evaluated state by state, so a small online seller might have physical nexus only in their home state and no economic nexus anywhere else, meaning they collect tax in exactly one state. A larger seller who ships nationwide can cross the economic threshold in dozens of states and end up registered in all of them. There is no federal sales tax and no single national threshold; each state sets and enforces its own rule.
| Question | If yes |
|---|---|
| Do you have an office, employee, warehouse, or stored inventory in the state? | You have physical nexus. Register and collect there now. |
| Have your sales shipped into the state passed roughly $100,000 in the current or prior calendar year? | You likely have economic nexus. Check that state's exact threshold and register. |
| Have you made 200 or more separate transactions into the state this year or last? | Some states still count this instead of, or alongside, the dollar figure. If so, you likely have economic nexus there too. |
| Are all of your sales into that state made through a marketplace like Amazon, Etsy, or Walmart Marketplace? | The marketplace is generally required to collect and remit the tax for you on those sales. You may not need to register for that state on marketplace sales alone. |
| Is what you sell a service rather than a physical good? | Many services are exempt by default in most states (goods usually are not). Check your state's specific rule before assuming either way. |
Source: South Dakota v. Wayfair, Inc., 585 U.S. 162 (2018); South Dakota Department of Revenue, "Remote Sellers: Are You Collecting Sales Tax?"
What is the typical economic nexus threshold?
The most common pattern, copied from the original South Dakota law that the Supreme Court upheld, is $100,000 in sales, or 200 separate transactions, into the state in the current or previous calendar year. Cross either number and you have economic nexus. But "typical" is not "universal": states set their own numbers, and they change them. South Dakota itself dropped the 200-transaction count in July 2023 and now uses only the $100,000 sales figure. Other states use different dollar amounts, count only sales (not transactions), or measure the look-back period differently. There is no substitute for checking the specific state's current rule before you assume you are clear. See our state-by-state tax pages for the numbers as we track them.
When do I need to register for sales tax?
Register before you make a taxable sale in a state where you already have nexus, and as soon as you cross an economic threshold in a new state. In practice: check your trailing 12 months (or the calendar-year window your state chart uses) of sales by state on a regular schedule, quarterly is reasonable for a growing online business. The moment a state's number clears its threshold, register with that state's Department of Revenue (or equivalent agency) before your next sale there. Waiting until you notice a big year-end number is how sellers end up owing back tax, penalties, and interest on sales they never collected tax on in the first place.
Are services exempt from sales tax?
Often, but not automatically, and not everywhere. Most states start from the same default: sales of tangible personal property (physical goods) are taxable unless a specific exemption applies, while sales of services are exempt unless a specific state law makes that particular service taxable. Minnesota's Department of Revenue states this plainly: taxable sales include tangible items, and services are nontaxable unless specifically listed as taxable. A handful of states flip that default and tax services broadly unless exempted. So a freelance consultant, designer, or coach is often outside sales tax entirely, while a business selling a physical product almost always needs to think about it. Mixed transactions, like a service that includes a physical component, get taxed based on how the invoice separates the charges, so check your state's specific guidance rather than assuming your whole business is exempt because part of it is a service.
Do Amazon and Etsy collect sales tax for me?
Yes, on sales made through their platform, in every state that has a sales tax. These are called marketplace facilitator laws: they require the marketplace itself, not the individual seller, to calculate, collect, and remit sales tax on transactions it facilitates, once the marketplace (or its combined sellers) meets that state's nexus threshold. South Dakota's rule is typical: a marketplace provider must register and remit tax on all sales it facilitates into the state once it, or its sellers combined, meet the same threshold that applies to a remote seller. That is genuinely useful if you sell exclusively through Amazon, Etsy, or a similar marketplace: you generally do not need your own sales tax permit for those specific sales, because the platform is already the one collecting and paying the state. The catch is scope. A marketplace only handles tax on sales made through it. If you also sell on your own website, at a market, or wholesale, those sales are yours to track and, once you have nexus, yours to register and collect on separately.
How do I register for a sales tax permit?
You register directly with the Department of Revenue (sometimes called the Department of Taxation or a similar name) in each state where you have nexus, not with the federal government. There is no single national sales tax registration. The typical process: go to that state's Department of Revenue website, find its sales tax or seller's permit application, and register online. You will generally need your business's legal name and address, your EIN or Social Security number, your business structure, and the date you started or expect to start selling in that state. Most states issue the permit at no cost or a small nominal fee, and many process online applications within days. Once registered, the state assigns you a filing frequency, monthly, quarterly, or annually, based on your expected sales volume, and you file a return and remit whatever tax you collected on that schedule, even if it is zero for that period.
The flat truth
Ignore the tax-software marketing and remember two numbers: nexus is physical presence or roughly $100,000 in sales to a state, and the exact figure is set by that state, not by any vendor's sales page. If you are a small operation selling mostly through Amazon or Etsy, marketplace facilitator laws are probably already handling most of your exposure, and you may need zero permits of your own. If you sell direct, through your own site or wholesale, check your sales by state a few times a year against each state's current threshold (our state tax pages track them), and register the moment you cross one. This sits right alongside the rest of your setup work in our start-a-business checklist, specifically the licenses and taxes steps: sales tax is not a special hurdle, it is one more thing to check off once you are actually selling.
Sources
- The Wayfair ruling, the overturned physical-presence rule, and South Dakota's original $100,000 / 200-transaction law at issue: South Dakota v. Wayfair, Inc., 585 U.S. 162 (2018), Supreme Court opinion.
- South Dakota's current $100,000 threshold (200-transaction count dropped effective July 1, 2023) and marketplace provider collection rule: South Dakota Department of Revenue, "Remote Sellers: Are You Collecting Sales Tax?".
- The default rule that tangible goods are taxable and services are exempt unless specifically listed: Minnesota Department of Revenue, "Nontaxable Sales".
- Thresholds and rules vary by state and change over time; always confirm the current figure with the specific state's Department of Revenue before relying on it.