Sales Tax Economic Nexus: Track Sales by State in Your Books

How do I track sales by state for economic nexus?

Record each sale with the state it was delivered to, total the sales by state over the period that state measures, and compare each total with that state's line. A line is usually a dollar amount of sales into the state. Many states also have a count of sales: some cross on dollars or the count (either one), some need dollars and the count (both, as in New York), and some have dropped the count (Streamlined Sales Tax Governing Board chart).

What makes it more than one report: states do not count the same things. A sale that counts toward one state's line may not count toward another's, and the periods differ. So one "revenue by state" number can be right for one state and wrong for the next. Record the parts (taxable, exempt, resale, shipping, channel, selling company) and let each state's rule pick which to add up.

Gather before you start:

• Orders or invoices for the previous calendar year and this year so far, each with a ship-to state.
• Sales split by channel: your own checkout, each marketplace, invoices.
• Which sales were exempt or for resale, and the certificates behind them.
• Every company you own or control that sells.
• Where you keep inventory, including goods a marketplace or warehouse stores for you, and where you have people. A seller with a physical presence in a state is not a remote seller, so the dollar line may not be the test (Streamlined chart); see where you have to collect sales tax.

Each state's line is in sales tax economic nexus thresholds by state.

This is more than a spreadsheet job if you sell through both a marketplace and your own store, you are near a line in two or more states, you own more than one selling company, or your order data cannot give a total by delivery state. The counting rules, start dates and ledger tie-out may then need to be set up together; see bookkeeping help.

What do I record on each sale?

Record the delivery state, the dates, the amount in parts and the channel. Those fields feed the tests below. Where a state counts sales, follow its definition of a sale: New York counts each invoice, sales slip, contract or other memorandum of sale (New York Tax Department).

Which sales count: taxable, exempt, resale, shipping, related companies?

Texas, New York and Pennsylvania count taxable and nontaxable sales, California may count nontaxable sales such as resale and adds sales by related companies, and Florida counts taxable remote sales only. The Streamlined chart says a state may base its line on gross sales, gross revenue, retail sales or taxable sales, and many states do not separate taxable from nontaxable sales. The chart's heading says January 2023 and some rows were updated later, so confirm each state on its own page.

California counts sales by anyone related to you, with related defined by Internal Revenue Code section 267(b) (California CDTFA). List every company you own or control and have your preparer say which are related.

States word the line differently, as "exceeds", "less than" or "at least", so a seller exactly at a line should read the state's text and ask.

Do marketplace sales count when the marketplace collects the tax?

In some states yes, in some no. Texas, New York and California count marketplace sales toward your line even when the marketplace collects the tax (Texas, New York, California). Pennsylvania tells a marketplace seller to count its direct sales and sales through a marketplace that does not collect for it (Pennsylvania). Florida's statute says a marketplace seller counts only sales made outside a marketplace when it tests its line, so leave out sales made through a marketplace (Florida Statutes 212.05965); a seller with a physical presence in Florida registers regardless.

Tag each sale with its channel and whether the marketplace collected, so one table serves both kinds of state. A marketplace's collection does not cover your own checkout: a Texas seller over the line must still collect on its website sales while the marketplaces handle theirs (Texas Comptroller).

Keep proof that the marketplace collects. Texas expects a certification from the marketplace provider and says to collect until you receive one; California points to an agreement or other documentation showing the facilitator is registered and responsible (California CDTFA).

Goods a marketplace stores for you in a state may count as physical presence there. Texas says a seller above its line with goods in a marketplace's Texas facility must hold a permit and collect, and a seller below it need not if the marketplace has certified (Texas Comptroller). Whether a marketplace seller needs a permit elsewhere is in where you have to collect sales tax.

Which period does each state measure?

Each state names its own period: a calendar year, a rolling twelve months or sales tax quarters. Keep totals by state and by month, and you can build any of these views from the same table.

A New York quarter is not a calendar quarter, so a calendar-quarter report will not give New York's total.

For any other state, read three things on its page: what it counts, the period it measures and when collection must start. Add them to your state table.

How do I get a sales-by-state report from my store, invoices or books?

Export the orders with their ship-to state, then total them by state and month. Use the delivery address on each order, not the customer's billing or account address.

1. Export orders or invoices from every place you sell: your store, each marketplace, your invoicing and point of sale. Take order number, dates, ship-to state, amounts and channel.
2. Stack the exports in one sheet, one row per order. Add what an export lacks, such as the selling company and exempt or resale amounts. If an order mixes taxable and exempt items, split its amount into columns, or use item rows that keep the order number so the count is not inflated.
3. Total by state, month and channel with a pivot table or a query. Add a "state missing" line and clear it to nothing; a sale with no state is in no total.
4. Apply each state's counting rule from the tables above to those totals.

Tracking a line does not need a separate income account for each state; keep the state detail in the order-level sheet and tie its monthly total to the ledger's sales.

If your books are your only record, a sales-by-customer report works only when each customer has one delivery state and the books hold individual sales. Daily or payout summaries cannot be split by state, and New York tells registered vendors that records without the detail of each transaction, such as summary reports, may be treated as inadequate (TB-ST-770). Keep the order-level export even if the books carry summaries; see every order or payout summaries.

How do I keep state totals tied to the sales in my ledger?

Each month, add up the state report for all states and compare it with the sales your ledger shows for the same month. List every difference until it is explained. A state total you cannot tie to the ledger is a number to doubt before you act on it.

Texas lists total gross receipts of sales among the records a seller must keep (Texas Comptroller). For point-of-sale records, New York says records are complete only if source documents can be reconciled directly to the books and the returns (TB-ST-770). Payouts, fees and refunds are in reconciling sales and payouts.

How often should I check, and when does collection start after I cross?

A monthly check catches a crossing in a state that looks at a moving twelve months, as Texas does, so a seller can cross in any month. New York tells sellers to review after each sales tax quarter ends (New York Tax Department). California counts a running total for the year and expects registration the day it passes the line, so when close, watch that total as sales happen and keep the date and the sale that crossed.

Start rules differ, and each is set by when you cross the line:

Registration steps are in the guides for New York, Texas and California; other states' start dates are in the thresholds guide. Record the crossing date and sale, the period measured, and the start date the state's rule gives.

What do I do the month a state total gets close?

Confirm what the state counts, estimate the month you will cross, and work out the start date before you get there.

1. Re-read the state's page for the line, what counts and the period. Summaries and charts go out of date.
2. Re-run the total with everything the state counts: marketplace sales, resale sales, fees and related companies' sales.
3. Estimate from recent months when the total will pass the line, and write down the permit date the state's start rule then gives.
4. Check whether you already have a reason to register, such as inventory or people in the state, and whether what you sell is taxable there (ship-to address and rate).
5. Decide when to register. A seller that knows it will sell into a state may register at any time (Streamlined chart).

A permit is not the only thing that can start other filings, such as a state's income or franchise tax; see sales tax nexus and income tax nexus.

What records do I keep, and for how long?

Keep the order-level sales records behind every state total, the marketplace and exemption documents, and the worksheet that shows how you counted. Keep them for each state's required period, and longer during an audit or appeal. Texas's minimum of 4 years applies to all sellers, including a marketplace-only seller that needs no permit (Texas marketplace FAQ); the New York minimum below is for registered vendors.

Records of sales into a state matter before you register too. California says to keep records of sales into California to show you do not meet the threshold (California CDTFA), so a seller under every line still has a reason to keep its state table. For federal records, see how long to keep business records.

What if I find I crossed a line in a past year?

Use the monthly table to find the first month the state's test was met, the date collection should then have started under that state's rule, and what you sold after it. Those facts shape what is owed and which options exist. A state counting twelve months, four quarters or a calendar year can give a different first month from the same sales.

The tax side is not a bookkeeping fix: registering, back tax, penalties and any voluntary disclosure are separate decisions; see catching up on uncollected sales tax. In New York, partners, LLC members, and officers, managers or employees with a duty to act can be personally liable for tax required to be collected (Tax Law 1131; 1133). The records side is bookkeeping: if several states, or marketplace and direct sales mixed over years, make the first month hard to find, the books may need rebuilding from the order level first; see bookkeeping help.

Example

These examples are illustrative; the figures are in US dollars.

Texas: a marketplace plus your own checkout

A seller in Ohio, with no people or inventory in Texas, ships $540,000 of goods into Texas over twelve calendar months. $300,000 goes through marketplaces that certify they collect, and $240,000 through its own checkout. Texas counts all $540,000, which is over Texas's $500,000 line, so the seller must get a permit and collect on its own checkout sales. If the twelve-month total first passed the line in March, the permit and collection start no later than July 1. A report of direct sales alone shows $240,000 and misses it.

New York: dollars met, sales count not

A seller with no New York presence delivers $520,000 of goods into New York over four sales tax quarters, in 90 sales on all channels. The dollar test is met, but the count test, more than 100 sales, is not, so New York's page says registration is not yet required. When the review after the quarter ending November 30 shows 101 sales with the total still above $500,000, both tests are met. Registration is due within 30 days of that quarter-end, by December 30, and collection starts 20 days after that deadline, on January 19. The state table needs a count of sales as well as dollars.

Pennsylvania: nontaxable sales count

A seller with no Pennsylvania presence sells directly, not through a marketplace. In one calendar year it makes $60,000 of taxable sales to Pennsylvania buyers and $45,000 of sales that are not taxable in Pennsylvania. The Department counts the gross amount of taxable and nontaxable sales, so the total is $105,000, over its $100,000 line. A taxable-only report shows $60,000 and misses it. Collection then starts on April 1 of the following year.

Different for you?

• You are near or past a line in two or more states, sell through both a marketplace and your own store, have more than one selling company, or cannot get a clean state report from your order data: the counting rules, start dates and ledger tie-out may need to be set up together. See bookkeeping help.
• You already sold in a state without collecting: see catching up on uncollected sales tax. If those years' orders and payouts are not in order, see bookkeeping help.
• You need a state's line, or the tests themselves, such as physical presence or a marketplace warehouse: see sales tax economic nexus thresholds by state and where you have to collect sales tax.
• You need the right rate for a ship-to address, or are turning on collection in an online store: see ship-to address and sales tax rate and store sales tax by state.
• You are registering or registered: see New York, Texas and California registration, filing sales tax returns, and sales tax nexus and income tax nexus for whether a permit also starts an income or franchise tax filing.
• You sell software, subscriptions or services, or ship into the US from another country: where a sale is located for a state's test depends on what you sell and from where; see sales tax on SaaS and software and foreign sellers and sales tax.
• You need to match payouts to sales: see reconciling sales and payouts.