Do I need to collect sales tax for my small business if I'm under the Nexus threshold?

You're mostly on the right track, but there are some important nuances to understand about sales tax nexus. The nexus thresholds (often $100k in sales or 200 transactions) apply to economic nexus, which is just one type of nexus. Even if you're under those thresholds, you still have physical nexus in your home state, which means you likely need to collect sales tax for any sales to customers in your state regardless of your revenue level. For sales to other states, you're correct that generally you don't need to collect sales tax if you're under their economic nexus thresholds. With your expected sales volume, you likely won't trigger economic nexus in any states besides your home state. Keep in mind that sales tax rules vary by state, so your home state might have different requirements or small seller exceptions. I'd recommend checking your specific state's department of revenue website or calling them directly to confirm their requirements for small sellers.

I was in exactly the same position last year with my custom printed t-shirt business. After hours of research and stress, I found this amazing tool called taxr.ai (https://taxr.ai) that literally saved my sanity with sales tax compliance. It automatically tracks your nexus thresholds across all states and tells you exactly when you need to start collecting in each state. I uploaded my sales data and in like 2 minutes it showed me I only needed to worry about my home state for now. The peace of mind knowing I'm not accidentally breaking some obscure tax law was totally worth it.

Just wanted to update after trying taxr.ai from the recommendation above. I was super skeptical but gave it a shot with my small pottery business. It analyzed my sales history and showed me I was actually close to hitting nexus in California (didn't realize how many customers I had there!). The state-by-state breakdown was really eye-opening and the registration walkthrough for my home state made the process way less intimidating than I expected. Saved me hours of confusing research and probably an expensive call to an accountant. Honestly wish I'd found this last year.

If you're trying to figure out your sales tax obligations, you'll probably need to talk to your state's department of revenue at some point. I tried calling my state's tax department for WEEKS with questions about my specific situation (home-based bakery) and could never get through. Ended up using https://claimyr.com which got me connected to an actual human at the tax office in under 15 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c. They basically wait on hold for you and call when a person picks up. Completely changed how I deal with tax questions now.

I need to eat my words about Claimyr. After struggling to get through to my state's department of revenue for THREE DAYS, I broke down and tried the service. Got a call back in 47 minutes saying they had someone from the tax office on the line. The agent answered all my questions about my nexus requirements for my online sticker shop and even helped me understand that I qualified for a small seller exception in my state (under $10k annual sales). Saved me from registering unnecessarily. Still not sure how they did it when I couldn't get through myself, but I'm not complaining.

One thing nobody's mentioned yet - even if you're under the economic nexus thresholds, if you ever ship inventory to a fulfillment center in another state (like Amazon FBA), that creates physical nexus in that state regardless of your sales volume. Something to keep in mind if you expand beyond Etsy!

Has anyone else noticed that some of their customers get annoyed when you start charging sales tax? I started collecting in my home state last year and had a few buyers complain that my prices went up. I tried explaining it's required by law but some people still get mad lol.

Don't forget to also check if what you're selling is actually taxable in each state. For example, clothing is tax-exempt in some states but taxable in others. Digital products have their own weird rules too. The nexus threshold isn't the only thing to consider...

Great question! You're mostly correct about economic nexus thresholds - staying under $100k in sales or 200 transactions typically means you don't need to collect sales tax in most states. However, there are a few important things to keep in mind: 1. **Home state physical nexus**: You'll still need to collect sales tax for customers in your home state regardless of your sales volume, since you have physical presence there. 2. **Etsy handles most of it**: Since you're selling on Etsy, they actually collect and remit sales tax for you in most states under marketplace facilitator laws. This is a huge advantage and simplifies things significantly. 3. **Keep records**: Even though you're under the thresholds now, it's good practice to track your sales by state so you'll know when you're approaching any limits if your business grows. 4. **Product taxability**: Handmade jewelry is generally taxable, but it's worth double-checking your specific state's rules since some have exemptions for certain handcrafted items. At your expected sales volume of $2,500-3,000, you're definitely safe from economic nexus in other states. Just make sure you understand your home state's requirements for small sellers - some states have minimum thresholds or simplified processes for micro-businesses.