From Wayfair to Now: The Evolution of Economic Nexus

It has been nearly eight years since South Dakota v. Wayfair turned the sales tax world on its head. And while states have made efforts to streamline compliance for remote businesses, the overall system has aged about as gracefully as a spreadsheet with 47 tabs and no connecting formulas.

In 2018, The U.S. Supreme Court overruled the long-standing sales tax nexus physical presence rule, holding that a seller can establish sales tax nexus based solely on economic activity—no inventory, no employees, no boots on the ground required. South Dakota’s law, which imposed a $100,000 sales threshold or 200-transaction threshold, was upheld because the Court determined that level of activity created a sufficient connection to justify collection obligations.

What followed was a new compliance era. States were left to define economic nexus, set their own economic nexus thresholds, and decide how aggressively to enforce economic nexus rules on remote sellers. The result? Not a unified system, but a constantly evolving patchwork of state-level requirements.

A Trip Back in Time: Before Economic Nexus

Before Wayfair, physical nexus sales tax rules dominated. If a business didn’t have a tangible presence in a state—such as employees, an office, or stored inventory—it generally didn’t have to collect sales tax there. As ecommerce accelerated, that framework became increasingly outdated. States watched tax revenue slip through their fingers as consumers shifted spending online, while use tax compliance remained… optimistic at best.

South Dakota challenged that status quo directly. In 2016, the state enacted emergency legislation arguing that the inability to tax remote sales was “seriously eroding the sales tax base,” causing revenue losses that would normally go toward critical services.

The Supreme Court ultimately sided with South Dakota, emphasizing several key arguments. For one, the Court noted that there were protections for smaller merchants through reasonable thresholds, and that the state aligned with the Streamlined Sales and Use Tax Agreement. Additionally, South Dakota was not seeking retroactive taxes. These amongst other arguments were what gave states the green light to enforce economic nexus and expand sales tax beyond physical presence.

What Economic Nexus Looks Like Now

Fast forward to today, and the most significant shift is clear: states are moving away from transaction thresholds and toward simpler revenue-only models.

In the early days post-Wayfair, most states mirrored South Dakota’s dual-threshold structure. But over time, transaction thresholds proved more problematic than they were worth. A business could trigger nexus with 200 low-dollar sales—say $10 each sale—resulting in just $2,000 in total revenue. That’s a far cry from “substantial nexus.”

States have taken note of this. In 2024, 25 states limited economic nexus to a dollar threshold only, a trend which has continued in recent months. Utah removed their 200-transaction threshold in July 2025, and Illinois‘ dropped theirs in January 2026. Currently, only 18 U.S. states continue to impose transaction thresholds.

In theory, this lends toward the belief that more simplification is on the horizon. If your revenue is meaningful, you have nexus. If not, you don’t. However, uniformity is still not consistent. Threshold amounts, measurement periods, and inclusion rules still vary widely by state.

Marketplace Facilitator Nexus: A Parallel System

No discussion of economic nexus is complete without addressing marketplace facilitator nexus.

Post-Wayfair, states increasingly moved collection obligations from individual sellers to the platforms facilitating the sales. Today, nearly every state with a sales tax requires marketplace facilitators to collect and remit tax on behalf of third-party sellers. And while this can be a huge relief for sellers, it’s not a free pass.

Marketplace facilitators calculate nexus based on all sales into a state, meaning they almost always exceed economic nexus thresholds. But sellers themselves are often still required to count marketplace sales toward their own thresholds, and even register when they sell solely through a facilitator. In New Jersey:

“A remote seller that is over the economic threshold, but sells solely through one or more marketplaces must register, but may request to be placed on a non-reporting basis for Sales Tax, since the marketplace is required to collect the tax on all marketplace transactions.” – New Jersey Division of Taxation

This is a clear example of how nuanced the rules can be. Marketplace sales can reduce collection burdens, but they do not always eliminate all responsibility.

Physical Nexus Is Still Alive and Well

While Wayfair reshaped economic nexus, it did not make physical nexus obsolete. If anything, it made nexus analysis more layered.

Physical presence still creates immediate sales tax nexus, regardless of revenue. And “physical presence” is broader than many businesses assume. It can include:

• Interstate trade shows (even temporary)
• Remote workers
• Inventory in third-party warehouses or fulfillment centers
• Drop-shipping relationships

A business might never cross an economic nexus threshold but still have filing obligations due to physical presence alone. This means tracking your sales activities carefully.

What May Change Next

If the past eight years have shown us anything, it’s that economic nexus is not static. Several developments are already taking shape.

The most obvious near-term change is further simplification. States that still use both a sales threshold and a transaction threshold may continue to move toward revenue-only thresholds.

A second possible change is more aggressive marketplace rulemaking. States continue to refine what constitutes a marketplace facilitator, and expand definitions to capture more platforms. Washington changed its economic nexus standards in 2020 from retail sales to gross income, effectively changing what sales are captured in economic nexus analyses. California has recently updated and refined definitions of marketplace facilitators to include platforms that “directly or indirectly” list products, collect payments, and provide customer service. This restructuring and clarification suggests the policy conversation is headed toward centralizing compliance at the platform level wherever possible.

A third possibility is a renewed fight over retroactive exposure. While Wayfair emphasized non-retroactivity, recent cases in states like South Carolina and Wisconsin have held marketplace facilitators liable for periods before formal collection laws were enacted. The arguments have been won based on existing statutory language at the time. If more states pursue similar interpretations, businesses could face unexpected historical exposure tied to how states define “engaging in business.” This creates a great deal of developing risk.

Is Economic Nexus Due For a Reset?

Probably yes, but not in the dramatic, throw-the-whole-thing-out sense. More likely, the reset will be incremental: fewer transaction thresholds, greater reliance on marketplace collection, and ongoing attempts at interstate consistency. The current system works, but even after eight years, it could do with more efficiency.

That said, it is unlikely economic nexus thresholds will ever disappear. Wayfair made it clear that physical presence is an outdated proxy for modern commerce. From a policy standpoint, the challenge is balance: ensuring states can collect revenue without placing disproportionate burdens on businesses navigating dozens of overlapping rules.

From a business standpoint, the only simple takeaway is that economic nexus isn’t going anywhere. Everything else is complicated. Managing sales tax nexus today means tracking multiple exposure points simultaneously: your online sales thresholds, your marketplace activity and facilitator’s nexus, and physical presence triggers. If you only watch one lane, the others will quietly leave you in the dust.

If you’re unsure where you stand, SalesTaxSolutions.US can help you evaluate your nexus footprint across all 50 states and identify where you may have exposure—before it becomes a liability.