Sales tax nexus is the legal threshold that obligates a business to collect and remit sales tax in a U.S. state. Cross that threshold, and you are legally required to register, charge customers the correct rate, file returns, and remit the tax to the state authority.
For UK-based merchants, SaaS providers, and cross-border sellers, this creates a compliance obligation that many discover only after the fact — often when a state audit or marketplace notification arrives.
The critical point: you do not need a warehouse, office, or employee in the United States to have nexus. Since the U.S. Supreme Court's South Dakota v. Wayfair ruling in 2018, economic activity alone is sufficient.
Physical Nexus vs. Economic Nexus: The Core Distinction
Before Wayfair, nexus required a physical presence in a state — a store, a warehouse, staff. That standard no longer applies as the sole trigger.
Physical Nexus
Physical nexus still exists and is triggered by:
- Storing inventory in a U.S. fulfilment centre (e.g., Amazon FBA)
- Having a U.S.-based employee, contractor, or sales representative
- Attending U.S. trade shows or events beyond a limited threshold
- Owning or leasing U.S. property
Many UK sellers using Amazon FBA unknowingly create physical nexus in multiple states the moment Amazon distributes their stock across its fulfilment network.
Economic Nexus
Economic nexus is triggered purely by sales volume or transaction count within a state, regardless of where your business is incorporated or headquartered.
The most common threshold — adopted by the majority of states — is:
- $100,000 in sales into the state, or
- 200 separate transactions into the state
Both thresholds are typically measured over a rolling 12-month period, though some states use a calendar year. Exceed either figure in a given state, and you are required to register and begin collecting.
Disclaimer: This article is general information, not legal or financial advice. Tax obligations vary by state and business type. Consult a qualified tax professional for advice specific to your situation.
State-by-State Economic Nexus Thresholds: What UK Sellers Need to Know
Not every state follows the $100,000 / 200-transaction standard exactly. The table below covers the most commercially significant states for UK cross-border sellers.
- California — $500,000 sales threshold, no transaction threshold. Sales-only threshold; no transaction count.
- New York — $500,000 sales threshold, 100 transactions. Both conditions must be met.
- Texas — $500,000 sales threshold, no transaction threshold. Sales-only threshold.
- Florida — $100,000 sales threshold, no transaction threshold. Sales-only; effective July 2021.
- Illinois — $100,000 sales threshold, 200 transactions. Either condition triggers nexus.
- Washington — $100,000 sales threshold, no transaction threshold. Also includes marketplace sales.
- Pennsylvania — $100,000 sales threshold, no transaction threshold. Digital goods explicitly included.
- Colorado — $100,000 sales threshold, no transaction threshold. Includes a notice-and-report option.
- Tennessee — $100,000 sales threshold, no transaction threshold. Marketplace facilitator rules apply.
- Missouri — $100,000 sales threshold, no transaction threshold. Effective January 2023.
Sources: State Department of Revenue websites; Streamlined Sales Tax Governing Board, 2024.
Alaska, Delaware, Montana, New Hampshire, and Oregon currently have no statewide sales tax, so no nexus obligation applies at the state level (though some Alaskan municipalities levy local taxes).
How Marketplace Facilitator Rules Change the Picture
If you sell through Amazon, eBay, or Etsy, marketplace facilitator laws in most states mean the platform collects and remits sales tax on your behalf for those sales.
This does not mean you have no nexus obligations. It means:
Marketplace sales still count toward your economic nexus threshold in many states.
If you also sell direct-to-consumer through your own website (Shopify, WooCommerce), those sales are your responsibility entirely.
Some states require you to register even if a marketplace handles remittance, so you can file a return showing $0 owed on direct sales.
UK sellers running a hybrid model — Amazon FBA plus a Shopify store — face the most complex exposure and should audit both channels simultaneously.
For a deeper look at how marketplace rules affect your obligations, see Yonda's guide to sales tax compliance for marketplace sellers.
Digital Products and SaaS: A Specific Risk for UK Tech Companies
UK SaaS providers and digital product sellers face a distinct challenge: the taxability of digital goods varies dramatically by state.
Some states tax SaaS as a service. Others treat it as tangible personal property. Several exempt it entirely. There is no federal standard.
States that broadly tax SaaS and digital products include:
- New York — SaaS taxable as a service
- Pennsylvania — Digital downloads and SaaS taxable
- Texas — SaaS taxable; specific exemptions apply
- Washington — Digital automated services explicitly taxable
States with limited or no taxation of SaaS include:
- California — SaaS generally not taxable (as of current guidance)
- Florida — SaaS not currently taxable at the state level
- Illinois — Generally not taxable under current interpretation
If your UK SaaS company has crossed the economic nexus threshold in Texas or Pennsylvania, you have a live obligation — even if you have never set foot in the United States.
Yonda's digital products tax compliance solution is built specifically for SaaS and digital service providers navigating these rules across multiple jurisdictions.
Step-by-Step: How a UK Business Should Assess and Address U.S. Nexus
This is the practical process Yonda's tax specialists use when onboarding a new UK or EU client with U.S. sales exposure.
Step 1: Run a Nexus Exposure Audit
Pull 12 months of U.S. transaction data, broken down by state. You need:
- Total revenue per state
- Total transaction count per state
- Product/service types sold (physical goods, digital, SaaS)
- Fulfilment method (own warehouse, Amazon FBA, dropship)
Step 2: Map Against Each State's Threshold
Cross-reference your data against each state's economic nexus threshold. Flag any state where you have exceeded either the sales or transaction threshold.
Pay particular attention to states where you are approaching (but have not yet crossed) a threshold — these require monitoring, not immediate registration.
Step 3: Identify Physical Nexus Triggers
Check whether Amazon FBA or another 3PL has stored your inventory in specific states. Each state where inventory is held is a separate physical nexus trigger, independent of your sales volume.
Step 4: Determine Taxability of Your Products
For each state where you have nexus, confirm whether your product or service is actually taxable. Some goods are exempt (groceries, prescription medicine in many states). Some digital services are exempt in specific states.
Step 5: Register with State Tax Authorities
Register for a sales tax permit in each state where you have nexus. Do not begin collecting tax before you are registered — this creates its own compliance problem.
Registration can be done via the Streamlined Sales Tax (SST) system for the 24 member states, or individually through each state's Department of Revenue portal.
Step 6: Configure Tax Calculation in Your Sales Platform
Integrate a tax calculation engine with your Shopify store, WooCommerce site, or billing platform. This ensures the correct rate is applied at checkout, accounting for state, county, city, and special district rates.
Use Yonda's sales tax rate calculator to check rates by location before your integration goes live.
Step 7: File and Remit on Schedule
Each state has its own filing frequency (monthly, quarterly, or annually) based on your sales volume in that state. Missing a filing deadline triggers penalties and interest.
Step 8: Monitor Ongoing Thresholds
Nexus obligations change as your business grows. A state where you were below threshold last year may require registration this year. Build a monitoring process or use a managed service to track this automatically.
Voluntary Disclosure: What If You Are Already Behind?
Many UK businesses discover they have had nexus obligations for months or years before taking action. The good news: most states offer a Voluntary Disclosure Agreement (VDA) programme.
Under a VDA, a business proactively approaches the state, discloses the liability, and negotiates a limited lookback period — typically 3 years — and a waiver of penalties (though interest usually still applies).
VDAs are significantly better than waiting for a state audit, which carries no lookback limit and full penalties.
If you suspect you have historic U.S. nexus exposure, acting through a managed service provider before a state contacts you is always the lower-risk path.
Why Self-Serve Tools Fall Short for UK Businesses
Platforms like TaxJar and Avalara are designed primarily for U.S.-based businesses with U.S. bank accounts, U.S. EINs, and U.S.-based finance teams familiar with the system.
UK businesses face additional friction:
- No U.S. Employer Identification Number (EIN) — required for state registration in most jurisdictions
- Foreign bank accounts — some states require a U.S. bank account for ACH remittance
- Currency and reporting complexity — USD sales must be correctly reported and reconciled against GBP accounts
- No local support — self-serve tools offer documentation, not dedicated account management
Yonda's "Tech Powered – Human Led" model pairs automation with a dedicated tax specialist who manages state registrations, monitors thresholds, prepares returns, and handles correspondence with state authorities — on behalf of UK and EU-based clients.
Explore Yonda's U.S. sales tax managed service to see how this works in practice.
U.S. Nexus Alongside Global VAT: The Dual Compliance Reality
UK businesses selling into the U.S. are rarely dealing with U.S. sales tax in isolation. Most are simultaneously managing:
- UK VAT — including Making Tax Digital obligations
- EU VAT — via the OSS or IOSS schemes for cross-border B2C sales
- Canadian GST/HST — if selling into Canada
- Australian GST — if selling to Australian consumers
Managing these obligations separately, across different platforms and advisers, creates significant risk of errors, missed filings, and duplicated effort.
A single managed service covering all jurisdictions — with one point of contact — reduces that risk materially. Yonda's global VAT and GST services are designed precisely for UK and EU businesses with multi-jurisdictional exposure.
Key Takeaways for UK Businesses Selling into the U.S.
- Economic nexus applies to UK businesses selling into U.S. states — no physical presence required.
- The most common threshold is $100,000 in sales or 200 transactions per state, per year.
- Amazon FBA creates physical nexus in every state where your inventory is stored.
- SaaS and digital product taxability varies by state — Pennsylvania and Texas are high-risk jurisdictions.
- Marketplace facilitator rules do not eliminate your registration or filing obligations in all states.
- Voluntary disclosure is available if you have historic exposure — act before a state audit does.
- Self-serve tools are built for U.S. businesses; UK sellers benefit from a managed service with cross-border expertise.
If your UK or EU-based business is selling into the United States and you are unsure of your nexus position, contact Yonda Tax for a compliance review.
Frequently Asked Questions
Does a UK business need to register for U.S. sales tax if it only sells through Amazon?
Not always — but marketplace facilitator laws do not eliminate all obligations. Amazon remits tax on marketplace sales in most states, but those sales still count toward your economic nexus threshold. If you also sell direct-to-consumer, or if a state requires registration even for marketplace-only sellers, you may still need to register. A state-by-state audit is the only reliable way to confirm your position.
What is the economic nexus threshold for most U.S. states?
The majority of U.S. states set economic nexus at $100,000 in sales or 200 transactions into the state within a 12-month period. However, California, New York, and Texas use a $500,000 sales threshold, and some states have removed the transaction count entirely. Always verify the current threshold for each state where you have meaningful sales volume.
Does selling SaaS or digital products to U.S. customers trigger nexus?
Yes — if your revenue or transaction volume crosses a state's economic nexus threshold, the obligation exists regardless of whether you sell physical goods or digital services. The separate question is whether your specific product or service is taxable in that state. SaaS is taxable in states including New York, Pennsylvania, Texas, and Washington, but exempt or partially exempt in others.
What happens if a UK business has been trading in the U.S. without registering for sales tax?
Historic non-compliance can be addressed through a Voluntary Disclosure Agreement (VDA) with each affected state. A VDA typically limits the lookback period to three years and waives penalties, though interest on unpaid tax usually still applies. Acting proactively through a VDA is strongly preferable to waiting for a state audit, which carries no lookback limit and full penalties.
Can a UK business use the Streamlined Sales Tax (SST) system to register in multiple states at once?
Yes — the SST programme allows a single registration that covers 24 member states simultaneously, which significantly reduces the administrative burden of multi-state registration. Not all states are SST members, so separate registrations are still required for non-member states such as California, New York, and Texas. A managed service provider can handle both SST and non-SST registrations on your behalf.