For any online seller reaching US customers, understanding sales tax nexus is not optional. Nexus is the legal connection between your business and a state that requires you to collect and remit that state’s sales tax. Because the US has no single national sales tax, every state sets its own rules, and a growing online business can trigger obligations in many states at once. This guide explains how nexus works, why it changed dramatically in recent years, and what Korean founders selling into the US need to do.
What Sales Tax Nexus Means
Sales tax is a consumption tax charged on retail sales of many goods and some services. Unlike a value-added tax, it is generally added at the final point of sale and collected by the seller from the buyer. The seller then sends that money to the state.
You only have to collect sales tax in states where you have sales tax nexus. In other words, nexus is the trigger. Without it, a state cannot require you to collect on its behalf. With it, you must register, collect the correct rate, file returns, and remit the tax on schedule. There are two main kinds of nexus every seller should understand: physical and economic.
Physical Nexus
Physical nexus is the older and more intuitive concept. You create it by having a tangible presence in a state. Common triggers include:
- An office, store, or warehouse in the state.
- Employees or salespeople working there.
- Inventory stored in the state, including stock held in a fulfillment center.
The inventory point is critical for sellers who use fulfillment networks. If your goods are stored in warehouses across several states, you may create physical nexus in each of those states simply because your inventory lives there, even if you never set foot in the country. This surprises many founders who assume that being based abroad shields them from state obligations.
Economic Nexus and the Wayfair Decision
The bigger shift came from economic nexus. In 2018, a US Supreme Court decision commonly known as the Wayfair ruling allowed states to require sellers to collect sales tax based purely on their economic activity in the state, with no physical presence required.
After that decision, states adopted economic nexus thresholds. Once your sales into a state cross that state’s threshold, you have nexus there. Thresholds are commonly framed as a dollar amount of sales, a number of transactions, or either one, measured over a defined period. A frequently seen threshold is 100,000 dollars in sales or 200 transactions, but the exact numbers and rules differ by state, so you must check each state individually rather than assuming one figure applies everywhere.
The practical result is that a purely online business with no US footprint can still owe sales tax collection duties in multiple states, based only on how much it sells to residents there.
Marketplace Facilitator Rules
There is important relief for sellers who work through large marketplaces. Most states now have marketplace facilitator laws. Under these laws, the marketplace itself is responsible for collecting and remitting sales tax on sales made through its platform.
This means that if you sell through a major marketplace, that platform generally collects and remits the sales tax on those transactions for you. That significantly reduces your direct burden for marketplace sales. However, several nuances remain:
- Sales you make through your own website are not covered by marketplace laws, so you remain responsible for those.
- Inventory you store in a state through a fulfillment program can still create physical nexus, which may bring registration or filing obligations even when the marketplace collects the tax.
- Some states still expect sellers to register or report, even where the marketplace handles collection.
So while marketplace rules are a genuine help, they do not automatically erase every obligation. You still need to know where you have nexus and what each state expects.
How to Stay Compliant
Managing sales tax across many states can feel daunting, but a systematic approach keeps it under control:
- Map your nexus. List every state where you have physical presence, including inventory locations, and track your sales volume against each state’s economic threshold.
- Register before you collect. Once you have nexus in a state, register for a sales tax permit there before collecting. Collecting without registering can itself cause problems.
- Collect the correct rate. Rates vary not just by state but by city and district, so use reliable tax calculation tools rather than a single flat rate.
- File and remit on time. Each state assigns a filing frequency. Even a period with zero sales often requires a zero return.
- Keep clean records. Good documentation makes audits and registrations far less stressful.
Many growing sellers use automated sales tax software that connects to their store and marketplace accounts to track thresholds, calculate rates, and prepare filings. The cost of such tools varies, but for a multi-state seller it often pays for itself in saved time and reduced risk.
Why This Matters for Foreign Founders
Being based outside the US does not exempt you from US sales tax rules. Nexus is about your connection to a state through presence or economic activity, not about your own nationality or location. A foreign-owned company selling into the US is treated much like a domestic one for sales tax purposes. Understanding sales tax nexus early lets you price correctly, avoid surprise liabilities, and expand across states with confidence.
Frequently Asked Questions
If a marketplace collects sales tax, do I still need to worry about nexus?
Sometimes yes. The marketplace usually handles tax on sales made through it, but your own website sales are still your responsibility, and storing inventory in a state can create obligations even when the marketplace collects.
Does economic nexus apply to foreign sellers?
Yes. Economic nexus is based on your sales into a state, not on where your business is located. A foreign seller crossing a state’s threshold can be required to register and collect there.
How do I know if I have crossed a state’s threshold?
You track your sales and transaction counts into each state over the state’s measurement period and compare them to that state’s specific threshold. Thresholds differ by state, so check each one rather than assuming a single number.
This article is general information, not legal or tax advice; please consult a qualified professional for your situation. Sales tax nexus can get complicated fast, and we are glad to help you map your obligations. USdongsan offers a free consultation to help you understand your sales tax nexus and stay compliant across the US.
