Introduction

If you sell on Amazon FBA or Shopify, you have probably heard the horror stories. A seller gets a letter from the state of Washington demanding $5,000 in unpaid sales tax—even though they have never set foot in Washington.

This is called Sales Tax Nexus, and in 2026, the rules have changed again.

The good news? It is actually getting easier for small sellers. As of January 1, 2026, states like Illinois and Utah have dropped their strict “Transaction Thresholds,” meaning you likely won’t have to register there unless you make big money.

In this guide, we break down exactly when you need to collect sales tax, how “Amazon FBA Inventory” triggers it, and the new 2026 exemptions you need to know.

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1. What is “Nexus”? (The 2 Types)

“Nexus” is just a fancy legal word for “Connection.” If you have a “connection” to a state, they can force you to collect sales tax from customers in that state.

There are two ways to trigger it in 2026:

A. Physical Nexus (The Amazon Trap)

If you have a warehouse, office, or employee in a state, you have Nexus.

• The Trap: If you use Amazon FBA, Amazon stores your inventory in warehouses across 20+ states.
• The Rule: Technically, having inventory in a state creates Physical Nexus. This means you might need to register in states like California or Pennsylvania just because Amazon moved your stock there.

B. Economic Nexus (The $100k Rule)

Even if you have NO inventory in a state, you trigger Nexus if you sell enough to people who live there.

• The Standard Threshold: $100,000 in sales OR 200 separate transactions per year.

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2. Breaking News: The 2026 Rule Changes

For years, the “200 Transaction” rule was a nightmare. If you sold 201 cheap items (like $5 phone cases) to Illinois, you had to register—even if you only made $1,000 total.

The Update (Jan 1, 2026):

• Illinois has ELIMINATED the 200-transaction threshold. Now, you only need to register if you hit $100,000 in sales.
• Utah has also removed the transaction count.
• The Impact: This saves small sellers thousands of dollars in compliance fees.

⚠️ Warning: Some states (like Arkansas) still have the 200-transaction rule. Don’t assume every state is safe.

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3. “Marketplace Facilitator” Laws (Does Amazon Pay For Me?)

Most new sellers ask: “Doesn’t Amazon collect the tax for me?”

Yes, but…

Amazon is a “Marketplace Facilitator.” They will automatically add sales tax to the customer’s cart and send it to the state for you.

• The Catch: You still need to register in many states to file a “Zero Return”.
• What is a Zero Return? It is a form where you tell the state: “I sold $50k here, but Amazon already paid the tax. So I owe you $0.”
• Shopify Sellers: Shopify does NOT pay the tax for you automatically. You must turn on “Tax Collection” in your settings and pay the states yourself.

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4. 2026 Economic Nexus Thresholds (Cheat Sheet)

Here are the limits for the biggest states. If you cross these numbers in sales, you must register:

State	Threshold (Sales)	Threshold (Transactions)
California	$500,000	None
New York	$500,000	100 Transactions
Texas	$500,000	None
Florida	$100,000	None
Illinois	$100,000	Removed (2026)
Most States	$100,000	200 Transactions

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5. How to Track This Without Going Crazy

You cannot track 50 different thresholds in a spreadsheet. You need a “Nexus Tracker.”

1. Use A2X or Link My Books: These tools connect to Amazon/Shopify and show you exactly where your sales are coming from.
   • 👉 Read our review: A2X vs. Link My Books
2. Use a Tax Map: Software like TaxJar or Avalara will show you a “Heat Map” of your sales. When the bar turns red, it’s time to register.

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Conclusion: Don’t Panic, But Don’t Ignore It

Sales Tax Nexus is manageable if you stay organized.

• Step 1: Check if you hit the $100k limit in any state.
• Step 2: If you use Amazon FBA, check where your inventory is stored.
• Step 3: Use software to automate the filing.

Need to set up your accounting first?

Before you worry about taxes, make sure your bookkeeping is accurate.

👉 The Best Accounting Software for Amazon Sellers (2026)