Reviewed November 7, 2026

Shopify Sales Tax: Nexus, Thresholds, and the 100,000 Dollar Line

A store in one state sells to customers in thirty states and collects sales tax in one of them. That was legal before 2018 and it is not legal now. The Supreme Court's decision in South Dakota v. Wayfair let states require out-of-state sellers to collect sales tax once they cross a threshold, and most states set that threshold at 100,000 dollars in sales or 200 transactions.

The threshold is per state, per year, and the store that crosses it without registering is collecting a debt, not saving money. The tax is owed whether or not it was collected.

What nexus means now

Nexus is the connection between a business and a state that creates a tax obligation, and Wayfair added economic nexus to the old physical kind. Physical nexus still exists: an office, a warehouse, or employees in a state. Economic nexus is the new part, and it is triggered by sales volume alone, with no physical presence at all.

The thresholds vary by state, which is the part that catches people. Most states use 100,000 dollars in gross sales or 200 separate transactions in a year, but some use only the sales figure, some count only taxable sales, and a few set the bar higher or lower. California uses 500,000 dollars. New York uses 500,000 dollars and 100 transactions. The threshold that matters is the one in the state where the customer lives, not the one in the state where the store sits.

Marketplace facilitator laws add a second layer. When a store sells through a marketplace, the marketplace collects the tax, not the store. But sales on the store's own Shopify site are the store's responsibility, and marketplace sales do not count toward the store's own threshold in most states. The two channels have to be tracked separately.

What Shopify Tax does and does not do

Shopify Tax calculates the right rate for each order, tracks sales against each state's threshold, and tells the store when it is approaching nexus. That is the calculation half of the job, and it is the half that software does well. The registration half is still the store's: Shopify Tax does not register the store with a state, file returns, or remit the tax.

The workflow that works is to let Shopify Tax monitor thresholds, register in a state when the store crosses or approaches its threshold, and then enable collection for that state in Shopify. The store that enables collection before registering has the order backwards, and the store that registers but never enables collection is filing returns for tax it never collected.

Keep the records. Each state's filing schedule depends on volume, and the returns are due whether or not the store collected anything in the period. A state that the store registered in and then stopped selling to still expects a zero return, and the penalty for not filing is often larger than the tax would have been.

The mistake to avoid

The expensive mistake is the retroactive one. A store that crossed a threshold two years ago and never registered can owe back taxes, interest, and penalties for the whole period, and several states run voluntary disclosure programs that reduce the penalty for stores that come forward before an audit finds them. The threshold crossed quietly is still crossed, and the cheapest time to fix it is now.

Frequently asked questions

What is economic nexus?

The obligation to collect sales tax in a state based on sales volume alone, with no physical presence. Most states set the threshold at 100,000 dollars in sales or 200 transactions per year.

Does Shopify Tax register my store in new states?

No. Shopify Tax calculates rates and tracks thresholds, but registration, filing, and remitting are the store's responsibility.

Do marketplace sales count toward my threshold?

In most states, no. When a marketplace collects the tax, those sales are the marketplace's, not the store's, and they do not count toward the store's own economic nexus threshold.

What happens if I crossed a threshold and never registered?

The tax is owed for the whole period, plus interest and penalties. Several states offer voluntary disclosure programs that reduce the penalty for stores that come forward before an audit.