Navigating sales tax for your Shopify store can be challenging. Thanks to changes in nexus legislation over the last few years, it’s become increasingly difficult to know when to file sales tax returns in certain states and jurisdictions.
This mainly stems from the fact that each state makes its own rules and regulations regarding nexus, making everything completely different from state to state.
In this post, we’re sharing everything Shopify merchants need to know about sales tax nexus, including:
Article Contents
What is sales tax nexus?
Nexus refers to a connection or series of connections between two things. As a Shopify merchant, you typically establish nexus with a state by having a physical presence or economic connection that will then require you to collect sales tax from buyers.
It can be triggered by something as simple as having employees in a state, a warehouse, or headquarters. Or it could be less obvious, like triggering economic nexus because you exceed the sales tax threshold set by that state.
Shopify business owners who reach nexus must register to collect sales tax from buyers in that state.
Physical nexus vs. economic nexus
There are several types of nexus, but the most common ones you’ll run into as a Shopify merchant are physical, economic, and click-through. Here’s how they differ:
- Physical nexus: This applies to companies with any kind of physical presence in a state, including employees, a physical business location, a warehouse, or other places where goods are stored.
- Economic nexus: While this differs by state, it is usually the most common and is triggered when a business reaches a certain number of transactions in a state, revenue generated, or a combination of both.
- Click-through nexus: In most states, having a third-party affiliate making sales on your behalf triggers sales tax nexus once your affiliate exceeds a certain threshold.
Economic nexus example
If a New York business sells products and goods to California buyers exceeding $500,000 per year, it must register for a sales tax permit in California. After registering for a sales tax permit, the New York business can collect sales tax from California customers, file sales tax returns, and remit taxes owed.
Determining where you have nexus
Most states have an economic nexus threshold, which is typically $100,000 in sales or 200 transactions. However, this varies from state to state, with some states combining both. Knowing the sales tax thresholds in the states where you operate can help determine where you need to register and collect sales tax from your Shopify customers.
Here’s a look at the economic nexus thresholds by state. Each state looks at the number of transactions and/or revenue on a calendar or previous calendar year basis.
| State | Economic Nexus Threshold |
| Alabama | Retail sales of more than $250,000 made by the seller. |
| Alaska | Alaska does not have a statewide sales tax. However, some municipalities have a local sales tax. In those cases, the threshold is $100,000 in gross annual sales. |
| Arizona | Gross sales of $100,000 or more. |
| Arkansas | Taxable sales of $100,000 or more, or more than 200 transactions. |
| California | Sales of tangible personal property exceeding $500,000. |
| Colorado | More than $100,000 in retail sales. |
| Connecticut | Retail sales of at least $100,000 and 200 transactions. |
| Florida | Taxable retail sales of tangible personal property exceeding $100,000 or more. |
| Georgia | Gross revenue from retail sales of tangible personal property exceeding $100,000, or 200 or more transactions. |
| Hawaii | Gross proceeds of $100,000 or more, or 200 or more separate transactions. |
| Idaho | Sales exceeding $100,000 or more. |
| Illinois | Gross receipts from sales of tangible personal property of $100,000 or more, or 200 or more separate transactions. |
| Indiana | Gross revenue exceeding $100,000 or more. |
| Iowa | Gross revenue exceeding $100,000 or more. |
| Kansas | Gross sales exceeding $100,000 or more. |
| Kentucky | Gross receipts from sales exceeding $100,000, or 200 or more separate transactions. |
| Louisiana | Gross revenue from sales exceeding $100,000. |
| Maine | Total gross sales of tangible personal property or taxable services exceeding $100,000. |
| Maryland | Gross revenue from sales exceeding $100,000, or the number of transactions is 200 or more. |
| Massachusetts | Sales exceeding $100,000 or more. |
| Michigan | Gross sales of taxable and nontaxable items exceeding $100,000, or the number of transactions is 200 or more. |
| Minnesota | Retail sales exceeding $100,000 or more, or 200 or more retail sales. |
| Mississippi | Sales exceeding $250,000 or more. |
| Missouri | Gross receipts from taxable sales of tangible personal property exceeding $100,000 or more. |
| Nebraska | Retail sales of $100,000 or more, or the number of transactions is 200 or more. |
| Nevada | Retail sales of $100,000 or more, or the number of transactions is 200 or more. |
| New Jersey | Gross revenue from sales of tangible personal property, specified digital products, or taxable services exceeding $100,000 or more, or the transaction number is 200 or more. |
| New Mexico | Taxable gross receipts of $100,000 or more. |
| New York | Gross receipts from tangible personal property sales exceed $500,000 or more, and more than 100 sales of tangible personal property. |
| North Carolina | Gross sales exceeding $100,000 or more. |
| North Dakota | Taxable sales exceeding $100,000 or more. |
| Ohio | Gross receipts exceeding $100,000, or 200 or more separate transactions. |
| Oklahoma | Taxable merchandise sales exceeding $100,000 or more. |
| Pennsylvania | Gross sales exceeding $100,000 or more. |
| Rhode Island | Gross revenue from sales exceeding $100,000, or the number of separate transactions is 200 or more. |
| South Carolina | Gross revenue from tangible personal property sales, electronically transferred products, and services delivered into the state exceeds $100,000 or more. |
| South Dakota | Gross revenue from sales is $100,000 or more. |
| Tennessee | Retail sales exceeding $100,000 or more. |
| Texas | Revenue of $500,000 or more. |
| Utah | Gross revenue from tangible personal property sales, electronically transferred products, or services exceeds $100,000, or 200 or more separate transactions. |
| Vermont | At least $100,000 in sales or 200 individual sales transactions. |
| Virginia | Gross retail sales exceeding $100,000, or 200 or more sales transactions. |
| Washington | Cumulative gross receipts totaling $100,000 or more. |
| Washington DC | Gross receipts of $100,000 or more, or 200 or more separate transactions. |
| West Virginia | Gross sales exceeding $100,000 or more, or 200 or more separate transactions for goods and services. |
| Wisconsin | Gross sales of $100,000 or more. |
| Wyoming | Gross revenue from tangible personal property sales, admissions, or services delivered exceeds $100,000 or more. |
*Data is accurate as of February 2025
Keeping track of the states where you reach nexus manually can be time-consuming for your ecommerce business. An automated sales tax solution, like Zamp, takes that off your plate so you can focus on growing your business.
Does Shopify handle sales tax for my Shopify store?
Shopify is not a marketplace facilitator, which means it is not required to collect and remit sales tax for your company automatically. However, it offers default settings that can collect the appropriate sales tax based on your location and where your customers are based.
To enable or adjust your sales tax settings, go to your Shopify admin, click “Settings,” and then “Taxes.” You can turn on tax collection features and customize settings according to your business needs, such as overriding default tax rates for certain products or excluding taxes.
Does Shopify report sales tax to the states?
Shopify does not take active steps to report or submit sales tax to the authorities. Here are some steps to take to handle sales tax effectively:
- Use Shopify reports. The Shopify dashboard offers detailed reports that can act as raw data to help you with filings. These reports are supposed to track sales tax collected across different regions and periods.
- Improve your reporting process. Use a reporting system that helps you track your sales tax obligations. This will make filing accurate and timely for Shopify sellers.
What to do if you have reached sales tax nexus
If you’ve reached sales tax nexus in a state, you’ll need to register for a seller’s permit to collect sales tax. A seller’s permit is an identifier assigned to your business by a state’s government agency. It allows you to collect tax on the items you sell in your Shopify online store, which you must remit to the states after you file sales tax returns.
Registering for a seller’s permit
Here’s how you can register for a seller’s permit in states where you have hit nexus:
1. Check the state’s requirements
Every state has rules and regulations regarding sales tax. First, you’ll need to determine what sales tax rules apply to your storefront. You can contact each state’s Department of Revenue directly or contact a sales tax expert.
2. Gather all needed information
Before you apply for a sales tax permit, you should have all the necessary documentation ready to help you fill out the forms. You’ll need to know basic details about your business, such as its official name, the physical address where it operates, and the type of business you run (retail, wholesale, etc.).
You’ll also typically need:
- Federal Employer Identification Number (EIN) or your Social Security Number (SSN) for a sole proprietorship
- Activity start date for your business
- Contact number for a business representative
You may also need to provide articles of incorporation or articles of organization, an SS4 (IRS Determination Letter), and a corporate income tax return. This is not an exhaustive list, and you may need to provide other information when completing the application.
3. Fill out the application
You can generally fill out the application for a sales tax ID online. Most state revenue departments have designated online portals that will guide you through the process. Once you access the application form, you’ll be prompted to input all the information you previously gathered.
Some states require registration fees, which generally range from $5 to $100.
Shopify and sales tax nexus key takeaways
Shopify and sales tax nexus can be easier to handle with an automated sales tax solution, such as Zamp. Their software ensures that you stay sales tax compliant throughout the entire lifecycle. Plus, they offer:
- Real-time sales tax calculations for Shopify
- Registrations
- Sales tax filing and remittance
- Nexus tracking
This means you can rest easy while your sales tax requirements are completely taken care of. Get in touch with their team today to learn more about getting started.
