Let’s be honest. For a DTC brand founder, few things are less exciting than sales tax. You’re busy crafting products, building a community, and shipping joy across the country. The last thing you want is a surprise tax bill or a compliance headache.
But here’s the deal: ignoring nexus is like ignoring a leak in your roof. It might not seem urgent until the storm hits—and then you’re dealing with a flood of penalties, back taxes, and administrative chaos. This guide isn’t about scaring you. It’s about giving you the map, so you can navigate this complex landscape with confidence.
What is Sales Tax Nexus, Really? (It’s More Than Just a Physical Store)
Think of nexus as a handshake between your business and a state. It’s a “sufficient connection” that says, “Yep, you’re doing enough business here that you need to collect and remit our sales tax.” For decades, that handshake was almost always physical: a warehouse, an office, an employee.
Then came the game-changer: South Dakota v. Wayfair (2018). The Supreme Court said states could require out-of-state sellers to collect tax based on economic activity alone. Overnight, the rules expanded. Physical presence? Still counts. But now, so does hitting a certain sales volume or transaction count in a state—what we call economic nexus.
The Two Main Nexus Triggers You Must Know
For modern DTC brands, nexus usually comes from one of two places:
- Physical Nexus: The old-school trigger. Having any tangible presence in a state. That includes inventory (even in a third-party fulfillment center like an Amazon FBA warehouse), employees, contractors, a pop-up shop, or attending a trade show. Honestly, if you have a 3PL warehouse in Nevada, you have nexus in Nevada. Full stop.
- Economic Nexus: The new reality. You cross a state’s specific sales or transaction threshold. These thresholds aren’t uniform—most common is $100,000 in sales or 200 transactions, but some states are different. Kansas, for example, has a $0 economic nexus threshold. Once you hit it, you’ve shaken that state’s hand.
The Compliance Maze: What Happens After You Establish Nexus?
Okay, so you’ve triggered nexus in a few states. Now what? Well, compliance isn’t a single task. It’s a process. And it can feel like a maze if you’re not prepared.
The Step-by-Step (and Sometimes Overwhelming) Process
- Registration: Before you collect a single penny of tax, you must register for a sales tax permit in that state. Doing it the other way around—collecting tax without a permit—can get you in hot water.
- Collection: Now you need to charge the correct sales tax rate at checkout. Sounds simple, but rates can vary by county, city, and even special districts. A $50 candle might have a different tax rate in Dallas than in Houston. You’ll need a reliable, automated tax calculation software.
- Filing & Remittance: This is where many brands stumble. You must file returns and send the collected tax to the state, usually monthly, quarterly, or annually. The deadlines are strict, and the forms are, well, tedious.
- Record Keeping: Hold onto those records—invoices, exemption certificates, filings—for typically 3-7 years. States can audit you.
See what I mean? It’s a lot. And the pain point for growing brands is that this process repeats for every single state where you have nexus. The administrative burden scales…unpleasantly.
Common Pitfalls and How to Sidestep Them
Even with the best intentions, DTC brands trip up. Here are a few classic missteps—and how to avoid them.
| Pitfall | Why It Happens | The Smart Move |
| Ignoring Marketplace Sales | Thinking platforms like Amazon handle everything. | Understand “marketplace facilitator laws.” While Amazon collects tax on sales it makes for you, you’re still responsible for sales through your own site into that state if you have nexus. |
| Misunderstanding FBA Inventory | Forgetting that inventory in a fulfillment center = physical presence. | Regularly audit your 3PL/warehouse locations. One stock-keeping unit (SKU) in a state can create nexus for your entire business. |
| Setting & Forgetting Thresholds | Not monitoring sales by state until it’s too late. | Use your e-commerce platform analytics or a dedicated nexus monitoring tool. Set quarterly review alerts. Proactivity is cheaper than reactivity. |
| Mishandling Exemptions | Not properly validating tax-exempt resale or wholesale certificates. | Have a system to collect, validate, and store exemption certificates digitally. Don’t just take a customer’s word for it. |
Building a Scalable, Sane Compliance Strategy
You can’t manage a multi-state sales tax compliance strategy on a spreadsheet. Not for long, anyway. As you grow, your system must grow with you. Here’s a pragmatic approach.
First, embrace automation early. Invest in a reputable sales tax automation solution. These tools integrate with your cart (Shopify, BigCommerce, etc.), calculate real-time rates, and can even auto-file returns in many states. The ROI in saved time and avoided errors is massive.
Second, make nexus reviews a quarterly ritual. Grab a coffee, pull up your sales data by state, and check it against the latest thresholds. States do change their rules, you know. This simple habit prevents nasty surprises.
Finally, know when to ask for help. For many brands, partnering with a tax professional or accountant who specializes in e-commerce isn’t an expense—it’s an insurance policy. They can handle registrations, complex filings, and be your guide if an audit letter ever arrives.
The Bottom Line: It’s Part of the Journey
Look, grappling with sales tax nexus is a sign of success. It means you’re reaching customers far and wide. Sure, it’s a complex, ever-shifting part of the DTC landscape. But by understanding the triggers, respecting the process, and leveraging the right tools, you can turn this compliance obligation from a looming fear into just another operational box to check.
It lets you get back to what you do best: building a brand that people love. And that, after all, is the whole point.
