A few years ago, a small business owner in the Trinity Valley decided to take their products online. Business was good at local events, community markets, and through word-of-mouth referrals, but they figured a website might bring in a few extra sales.
At first, it did.
Those “few extra sales” soon turned into orders from Oklahoma, Louisiana, Florida, and eventually customers all across the country. What started as a local business was quickly becoming a national one.
Everything seemed great, until a conversation with their accountant.
“Have you checked your sales tax nexus obligations?”
The room got quiet.
“My what?”
Like many small business owners, they assumed sales tax was strictly a Texas issue. After all, the business was located in Texas, the inventory was in Texas, and they were already collecting Texas sales tax. Why would another state care?
The answer surprised them.
As online sales grow, businesses can create tax obligations in other states, even without opening a store, hiring employees, or setting foot across state lines. Suddenly, terms like economic nexus, marketplace facilitator, and sales tax registration become part of the conversation.
The good news? Understanding when you need to register in another state is far less complicated than most business owners fear.
When Does Your Small Business Need to Register in Other States?
For many small businesses in the Trinity Valley, sales tax seems simple enough. You register with Texas, collect sales tax when required, file your reports, and move on with running your business.
Then something exciting happens, you start selling online.
Like the example above, maybe you’ve launched an e-commerce store, begun shipping products across the country, or expanded your customer base through platforms like Amazon, Etsy, Shopify, or your own website. Suddenly, a question appears that many growing businesses don’t expect:
Do I need to collect sales tax in other states?
The answer is: sometimes.
Fortunately, understanding when you need to register in another state isn’t as complicated as it sounds.
What Is Sales Tax Nexus?
“Nexus” is simply a connection between your business and a state that creates a sales tax obligation. Years ago, businesses generally only collected sales tax in states where they had a physical presence, such as:
- An office
- A retail location
- A warehouse
- Employees working in that state
Today, many states also use something called economic nexus. Economic nexus means your sales activity alone may create a tax obligation, even if you’ve never set foot in the state. We have another handy blog about Nexus here: Understanding ecommerce Nexus Tax
When Should You Pay Attention to Sales in Other States?
Most states establish economic nexus thresholds based on sales volume.
A common threshold is $100,000 in annual sales into a state. Some states use different thresholds, and a few include transaction counts as part of the calculation.
The important takeaway is this:
Making a few sales to another state usually doesn’t trigger registration requirements. Consistently selling significant amounts into a state might.
For many Trinity Valley small businesses, this issue doesn’t become relevant until online sales begin to grow.
Marketplace Sales vs. Direct Sales
Here’s where things get confusing:
If you sell through marketplaces such as Amazon, Etsy, Walmart Marketplace, or eBay, the platform often collects and remits sales tax on your behalf under marketplace facilitator laws. However, if customers purchase directly through your website, you may still be responsible for monitoring economic nexus thresholds and registering where required.
That’s why it’s important to understand how your sales are being made, not just where they’re being made.
Warning Signs It May Be Time to Register
You may need to investigate sales tax registration in another state if:
- Online sales are growing rapidly.
- You regularly ship products nationwide.
- You store inventory in another state.
- You use third-party fulfillment centers.
- You have remote employees outside Texas.
- You are approaching six figures in annual sales to a particular state.
If any of these situations apply, it may be time to consult your accountant or tax professional.
The Good News: Software Makes This Easier Than Ever
The days of manually tracking dozens of state tax rules are largely behind us. Several platforms can automatically monitor nexus thresholds, calculate sales tax, and assist with filing requirements. Below is a table of popular options available:
| Software | Best For | Key Advantage |
|---|---|---|
| Avalara | • Growing e-commerce businesses • Multi-state sellers • Businesses with complex tax obligations |
Tracks sales tax rates, economic nexus thresholds, registrations, and filings across multiple states. |
| TaxJar | • Small and medium-sized online sellers • Shopify users • Businesses seeking a user-friendly solution |
Simplifies sales tax calculations, reporting, and filing management. |
| Shopify Tax | • Shopify store owners • Businesses wanting integrated tax management |
Built directly into Shopify and helps identify states where economic nexus thresholds may be approaching. |
| QuickBooks Online | • Businesses already using QuickBooks for accounting | Tracks taxable sales and integrates with specialized sales tax compliance software. |
Which One Is Right for Your Business?
Just starting to sell online?
➡ Shopify Tax may provide everything you need.
Growing and selling in multiple states?
➡ TaxJar offers a simple, affordable solution.
Managing significant multi-state sales?
➡ Avalara provides the most comprehensive compliance tools.
Already using QuickBooks?
➡ Start with QuickBooks reporting and add specialized tax software as your sales expand.
Best Practices for Small Businesses
You don’t need to register in every state “just in case.” Instead, focus on good recordkeeping and proactive monitoring. The goal is to stay ahead of potential obligations rather than scrambling after a state tax notice arrives. Consider these best practices:
- Review sales by state at least quarterly.
- Track where customers are located.
- Monitor sales growth trends.
- Understand whether marketplaces are collecting tax for you.
- Maintain accurate accounting records.
- Consult a CPA before expanding significantly into new markets.
- Use automation whenever possible.
Don’t Let Sales Tax Slow Down Your Growth!
Growing beyond Texas is a good problem to have! For most small businesses, sales tax registration in other states isn’t something to worry about immediately. However, as online sales increase, understanding economic nexus can help you avoid surprises and keep your business compliant. The key is knowing when your business has crossed the line from occasional interstate sales to a meaningful presence in another state’s marketplace. With good recordkeeping, the right software, and professional guidance when needed, managing multi-state sales tax is more manageable than many business owners realize.
Need Help Understanding Nexus and Sales Tax Compliance?
Whether you’re launching an online store, selling through marketplaces, or expanding beyond Texas, the Trinity Valley SBDC can help you understand the business implications of growth. Contact the Trinity Valley SBDC today for no-cost business advising and resources designed to help East Texas entrepreneurs navigate the next stage of success
Trinity Valley SBDC provides guidance and business advising to help entrepreneurs strengthen operations, improve management practices, and prepare for sustainable growth.
Trinity Valley SBDC is a partnership program with the U.S. Small Business Administration, the State of Texas, and Trinity Valley Community College. Advising services are offered by Trinity Valley SBDC without regard to race, color, age, national origin, religion, sex, or disability. Special provisions will be made for limited English-speaking individuals and those with disabilities. Those interested may contact us at 903-675-7403.
The North Texas Small Business Development Center Network is funded in part through a Cooperative Agreement with the U.S. Small Business Administration and Dallas College. The North Texas SBDC is an Accredited Member of the Association of Small Business Development Centers. SBDCs are supported by the U.S. Small Business Administration and extended to the public on a non-discriminatory basis. The SBA cannot endorse any products, opinions or services of any external parties or services. Reasonable accommodations for persons with disabilities will be made if requested at least two weeks in advance. Language assistance services are available for limited English proficient individuals.
All opinions, conclusions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the U.S. Small Business Administration or other funding partners.