Economic nexus is often treated as a bright-line rule in U.S. sales tax compliance. Cross a threshold, register, collect, file.
In reality, it is not a single rule. It is a decision-making framework with long-term consequences.
After the Wayfair decision, each sales tax state enacted its own version of economic nexus. While many states adopted similar headline thresholds, the similarities largely end there.
The differences matter because registration is not a one-time act. It creates recurring compliance obligations that continue even in periods with no taxable sales. Once registered, a business is committing to filings, recordkeeping, and exposure to notices, penalties, and audits.
This is why blanket advice like “register everywhere you have nexus” is often harmful for small businesses.
A thoughtful economic nexus approach requires context. It considers what is being sold, whether customers are taxable or exempt, how sales are routed through marketplaces, and how thresholds are calculated in practice. It also weighs the cost of compliance against the actual tax at issue, rather than treating registration as a purely moral or binary decision.
In practice, there are situations where a business technically meets a state’s economic nexus threshold, but the cost and administrative burden of registration materially outweigh the potential exposure. In those cases, the decision is not about ignoring the rules. It is about evaluating risk, timing, and proportionality.
Economic nexus should be treated as a risk management exercise, not a moral one.
When it comes to sales tax, the goal is not theoretical perfection across every jurisdiction. The goal is informed, defensible decision-making that aligns with a business’s size, risk tolerance, and growth plans.
For small businesses, fear-driven compliance decisions often create more problems than they solve. Clarity comes from understanding how the rules actually work, when registration is truly required, and what obligations follow.
Economic nexus is not about registering everywhere.
It is about knowing when registration makes sense and why.
