When Do You Need to Collect Sales Tax?
You don't owe sales tax everywhere — only in states where you've built up enough of a connection, called “nexus.” This guide explains in plain English what nexus is, when you cross it, and what to do next. It is general information, not tax advice — when in doubt, check with an accountant.
- You have to collect sales tax in a state once you have nexus there — a connection strong enough that the state expects you to collect.
- The two most common ways to get nexus: your home state (where you live and run your shop — usually your first obligation, though rules vary by state), and economic nexus (selling enough into another state to cross its threshold).
- Most states set that threshold at $100,000 in sales OR 200 transactions in a 12-month window — but the exact numbers vary by state.
- When you cross a threshold, you register with that state first, then switch on collection in Thryft Ship. Turning it on without registering won't collect anything.
What “nexus” actually means
Nexus is just a fancy word for “a strong enough connection to a state that the state wants you to collect its sales tax.” If you have nexus in a state, you're expected to register there, collect tax from buyers in that state, and pass it on. If you don't have nexus somewhere, you generally don't have to collect there at all.
One thing worth clearing up right away: this can apply even if you've never set up a formal business. Sales tax follows your selling activity, not whether you've filed for an LLC. If you're regularly selling to the public, a state may treat you as a seller who needs to collect — even if you think of it as just a side hustle. (More on that in the questions below.)
For a small reseller, nexus almost always comes from one of two things.
1. Your home state (physical nexus)
The state where you physically live and run your shop is usually the first place a tax obligation shows up — that's called physical nexus. Because you store inventory, pack orders, and operate from there, most states treat you as connected as soon as you're doing business, rather than after some sales threshold. In your home state, you collect tax on the orders you ship to buyers in that state — and Thryft Ship figures out the exact rate for you.
2. Selling a lot into another state (economic nexus)
You can also get nexus in a state you've never set foot in, just by selling enough into it. This is economic nexus. Every state sets a threshold — a dollar amount, a number of transactions, or both — and once your sales into that state cross it, you're expected to register and start collecting.
Here's the part that trips people up: it's measured per state, based on where your buyers are, over a rolling window of time (usually the past 12 months). So you could cross the line in a state simply because a lot of your customers happen to live there.
What the thresholds look like
Most states use the same common benchmark, but several are different. A few examples:
- The common one (most states): $100,000 in sales or 200 separate transactions in 12 months. Cross either one and you have nexus.
- Higher-dollar states: California, Texas, and New York use $500,000. Alabama and Mississippi use $250,000. These states are harder to trip into.
- “And” states: New York and Connecticut require you to pass both the dollar amount and the transaction count — not just one.
- States dropping the transaction count: some states have moved to a dollar-only test (for example, Illinois removed its 200-transaction trigger in early 2026), so a lot of small-dollar orders no longer counts against you there.
Want the exact rule for every state? Two free, regularly updated guides break down each state's threshold and registration rules in plain language: the Sales Tax Institute's Economic Nexus State Guide and Avalara's state-by-state nexus guide. When in doubt about your own situation, an accountant is worth the peace of mind.
What counts toward your thresholds
The monitoring inside Thryft Ship counts the sales you make through Thryft Ship. Sales you make somewhere else — another platform, in-person, a separate payment app — aren't part of what Thryft Ship sees, so keep those in mind separately if they're a big part of your business. A couple of details worth knowing:
- Refunds pull your numbers back down. If you refund an order, that sale comes back out of your threshold totals (it can take a day or two to update).
- It's about where your buyer is. A sale counts toward the state your buyer is shipping to, not where you are.
What to do when you cross a threshold
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Register with that state
Before you collect anywhere, you register with that state's tax authority. This is something you do directly with the state (or through an accountant or a service) — Thryft Ship doesn't register on your behalf.
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Add the state and turn on collection
Once you're registered, you add that state in your Thryft Ship settings and switch sales tax on. From then on, the right tax is calculated by Stripe Tax (which you get direct access to through your own account) and added at checkout for buyers in that state. Full steps: How to Turn On Sales Tax Collection.
Common questions
Do I need a registered business (an LLC) to owe sales tax?
Not necessarily. Sales tax follows your selling activity, not whether you've formally set up a business. A helpful way to think about it: clearing out your own used belongings once in a while (a weekend garage sale) is usually treated as an exempt “casual sale.” But if you're buying items to resell, making things to sell, or flipping for profit on a regular basis, most states consider you a “dealer” who needs to register and collect — even with no LLC, no storefront, and even if you just think of it as a side hustle. Registering with a state is what makes you official in their eyes. If you're not sure which side of that line you're on, an accountant can tell you quickly.
What about sales I make on Etsy or eBay?
Those are usually handled for you. Marketplaces like Etsy, eBay, and Amazon are “marketplace facilitators,” so the platform typically calculates and remits sales tax on those sales itself. The part that's on you is your own selling — your Instagram drops through Thryft Ship, or your own site — because there you're the seller of record. If you cross-post to a marketplace as well, just know those sales are covered separately from your Thryft Ship ones.
Does getting paid through Venmo or PayPal change anything?
No. If you sell through Instagram, you've either been checking out through Thryft Ship or getting paid externally — Venmo, PayPal, Cash App. Either way, how you get paid doesn't change whether you owe sales tax: a state treats those app payments just like cash. Those apps move money; they don't collect tax for you, so the responsibility still sits with you. The difference is that Thryft Ship can calculate and collect the right tax at checkout, while a Venmo payment leaves all of that on you to track by hand. (Using a personal payment account for business sales comes with its own headaches, too — that's a separate topic we cover elsewhere.)
What if I only sell in my own state?
Then your home state is likely the only place you need to think about — and depending on your state's rules, you may or may not need to collect at all. Economic nexus in other states only comes into play once you're selling a meaningful amount into them.
Do the thresholds reset every year?
Most states look at a rolling window — typically the past 12 months, or the current plus prior calendar year — rather than a hard January reset. That's exactly why watching your running totals is more useful than checking once a year.
What happens if I cross a threshold and don't register?
If you should have been collecting and weren't, the state can still expect that tax later — and it can come out of your own pocket, sometimes with penalties. That's the whole reason to keep an eye on your thresholds and register before it becomes a problem. If you think you may already be past a line, talk to an accountant sooner rather than later.
Does Thryft Ship tell me my exact tax obligations?
No — and no software should claim to. Thryft Ship shows you your sales by state and does the tax math at checkout once you're set up, but whether and where you're required to register is a legal question that depends on your full situation. Use the monitoring as an early-warning tool, and lean on a tax professional for the final call.
