Remote sales tax has become a core part of tax policy for ecommerce. With more transactions crossing state lines, states have written laws so that remote sellers, businesses with no physical presence in the buyer's state, contribute to local revenue. States set economic thresholds for sales or transactions, and once a remote seller passes one, it must start collecting and remitting sales tax there. The states that tax sales have each written their own version of those rules.
What Is a Remote Sales Tax
Remote sales tax is the obligation for a remote seller, one with no physical presence in the buyer's state, to collect and remit sales tax once its sales into that state reach a set threshold of gross receipts or number of transactions. It exists because states wanted to tax online sales the way they already taxed sales at a local store. Traditionally, sales tax applied only if a business was physically located in the jurisdiction. As more buying moved online, states lost revenue on interstate sales and changed the rules.
Today the rules center on economic nexus, which usually depends on gross sales or transaction volume. Many states set the threshold at $100,000 in gross sales in a calendar year. A number of states also add a transaction-count trigger, although several have dropped that prong in recent years.
Marketplaces matter too. If you sell through Amazon, BigCommerce, WooCommerce or Shopify, the marketplace facilitator may be legally required to handle compliance on your behalf.
Why Remote Sales Tax Matters More Than Ever
The 2018 Supreme Court decision in South Dakota v. Wayfair allowed states to impose sales tax obligations on businesses without a physical presence. That affected every remote seller, from one-person shops to large online retailers. Nexus, thresholds, economic nexus and marketplace facilitator rules now decide how your sales are taxed in each state, and many sellers are still working out where they stand.
For a long time remote sales tax was an afterthought for online sellers, and the 2018 Supreme Court decision ended that. That's no longer an option. States such as Illinois set specific thresholds for annual gross sales, and sellers who pass them must collect tax. This is economic nexus.
The Landmark Case: South Dakota v. Wayfair
In South Dakota v. Wayfair, Inc. (2018), the Supreme Court held that states can require sales tax collection from sellers with no physical presence, as long as economic nexus provisions are met. That overturned the earlier rule that a seller needed physical operations in a state to have nexus. States quickly passed their own thresholds, usually measured by gross sales or number of transactions.
For sellers, the practical result is that you have to monitor where you sell, how many transactions occur in each state and whether your gross sales cross a given threshold. Marketplace facilitator rules developed alongside, requiring online platforms to track the economic nexus activity of the sellers on them.
Fair competition and retail sales
Competition and retail sales. States wanted local retailers and online remote sellers on equal footing. Before, a store down the street had to collect sales tax while an out-of-state seller did not, so the online seller could charge less. Economic nexus puts both under the same compliance burden.
Revenue. Sales tax on sales that cross state lines pays for public services. States like Illinois rely heavily on that revenue, so they set strict nexus criteria to make sure remote sellers pay their share. Marketplace facilitator rules do the same job from another direction: they make large platforms responsible for collecting on behalf of the sellers who use them.
For the essentials in one place, read our ecommerce sales tax guide.
Ongoing Challenges of Remote Sales Tax & Possible Solutions
Several challenges remain since the 2018 ruling.
The Need for Uniform Guidelines
Before Wayfair, only sellers with a physical presence had clear tax obligations. Afterward, states updated their laws to enforce economic nexus based on gross sales or number of transactions. The result is a patchwork, and many remote sellers struggle with how much the requirements vary. Some states use specific cutoffs. Illinois, for example, requires $100,000 in gross sales and repealed its 200-transaction alternative effective January 1, 2026. Others have their own definitions or exceptions.
Many experts argue for federal guidelines. A national standard for thresholds, marketplace facilitator responsibilities and economic nexus would cut the complexity. Until there is one, remote sellers have to follow each state's rules separately, which raises administrative costs and the risk of errors or audits.
Taxing Across Borders: The Remote Sales Puzzle
The Government Accountability Office (GAO) noted that after Wayfair most states enacted or updated economic nexus laws, each defining its own threshold for gross sales or number of transactions. Sales tax collection rose sharply, reaching around $30 billion in 2021. For remote sellers, though, the work grew too: more filings, specialized software and the time to keep up all take resources from running the business.
The GAO also raised concerns about equity, efficiency and clarity. A seller in several states deals with more complicated rules than a single-location store, and since each marketplace or jurisdiction can set its own standards, the confusion compounds. A national approach, including marketplace facilitator obligations, would simplify the system and could improve state revenue.
Divided Opinions on Possible Solution
Some advocates favor a smaller step, such as a single registration and filing portal that simplifies compliance for remote sellers. Others propose broader reform that would standardize threshold definitions, marketplace facilitator responsibilities and nexus rules across all states. Such proposals might mirror the Streamlined Sales and Use Tax Agreement (SSUTA), which aims to reduce complexity for businesses that operate in multiple jurisdictions.
States have moved on their own, sometimes raising or lowering their gross sales and transaction limits, but real consistency is still missing. The patchwork has also produced legal challenges, with businesses questioning whether these varied measures hold up under interstate commerce law. Advocates of a federal framework argue that only one can resolve the confusion around economic nexus, thresholds and marketplace facilitator obligations.
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Why Federal Action May Be the Ultimate Solution?
Since the 2018 Supreme Court decision, courts have heard a wave of disputes over who can enforce sales tax collection on remote sellers. That leaves businesses planning around state laws that each define threshold, nexus and marketplace facilitator duties differently. Congress holds broad power over interstate commerce, which is why many people believe national legislation is needed for definitive answers on how states may tax remote sellers.
Without federal action, companies face possible audits, fines and sudden changes to the law that alter their obligations overnight. A consistent standard for economic nexus and retail sales across state lines would reduce the chance of being penalized for an honest mistake. Until then, keeping up with each state is the main compliance burden for sellers.
The Road Ahead for Remote Sales Tax
Remote sales tax is a lasting change in how states tax retail sales across state lines. The 2018 Supreme Court decision made economic nexus the rule, and it put new tax obligations on remote sellers and on every marketplace facilitator that handles their transactions. In states like Illinois, nexus no longer depends on physical presence, and compliance is not optional.
A more consistent legal framework would make the rules easier to follow. One workable approach would let each state keep setting its own tax rates while aligning the key definitions: marketplace facilitator, nexus, threshold and economic nexus. Uniform registration portals and standard definitions of taxable sales could go a long way toward untangling the multi-state puzzle.
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