Guide · Texas · Florida · California
We counted the wrong sales in 42 states
·7 min read
Do exempt sales count toward economic nexus thresholds?
In most US states, yes. Of the 48 jurisdictions tracked here, 30 measure economic nexus on gross sales and 12 on retail sales, and both include sales that carry no tax. Only 6 measure taxable sales alone. A seller whose product is exempt still crosses the line in 42 of them.
Gross sales vs taxable sales sounds like a bookkeeping distinction. In US economic nexus it decides whether you have a registration duty at all, and until 7 August 2026 this product got it backwards in 42 jurisdictions. If you sell something exempt, or something a state does not tax, we were telling you that you were clear of lines you were walking toward. This is what happened and what it means for your own numbers.
In this article
- The error, stated plainly, with the number of jurisdictions it affected
- What gross, retail and taxable actually mean when a threshold uses the word
- The current split across the 48 US jurisdictions, read live out of the engine
- Why California kept the same answer for a completely different reason
- How to tell in one minute which basis applies to the states you sell into
What we got wrong
The engine assumed every US state measured economic nexus on taxable sales, and carried a three-state exception list. The exception list was the reality and the assumption was the exception.
The shape of the error
The three-state list came from a payment processor's documentation rather than from the states. It was accurate about those three and silent about the other 45, and silence was read as agreement with the default. That is how a small correct fact becomes a large wrong one.
The direction matters more than the size. The error only ever pointed one way: it made exempt and non-taxable revenue invisible to a threshold that was in fact counting it, so the product under-warned. Over-warning is annoying. Under-warning is the thing this product exists to prevent.
What the three words mean
- Gross sales. Everything, including exempt sales, non-taxable sales and generally sales for resale. Texas states it most plainly: gross revenue including taxable, nontaxable and exempt.
- Retail sales. Excludes sales for resale, includes exempt retail sales. For a direct-to-consumer seller with no wholesale, this behaves exactly like gross.
- Taxable sales. Only the sales that actually carry tax in that state. This is the one where an exempt seller genuinely never trips the line, and it is the rarest of the three.
So two of the three bases count sales that carry no tax, and the third does not. Reading a threshold figure without reading its basis gives you a number that looks precise and answers a different question.
The split as it stands today
Read out of the engine at the moment this page was built, so it cannot drift from what the product actually uses. If a later reading moves a state, this section moves with it.
Two states that show the difference
Texas measures gross and Florida measures taxable. A seller with the same book of exempt-heavy revenue can be approaching the Texas line and nowhere near the Florida one, at identical revenue.
That is the whole practical consequence. The threshold figures are similar, the states are comparable in size, and the answer for one seller can be opposite in the two, entirely because of which sales each one counts.
Where the measure data comes from
Honestly: from a secondary guide that cites each state's statute, not from 48 statutes read one at a time. That is recorded on the API response as secondary confidence, with the source and the date, and it is a weaker footing than the threshold figures themselves.
The threshold amounts come from each authority's own page. The measure does not, and the difference is published rather than smoothed over. Confirming each cell against its own state's statute is a standing job, and it is not finished.
California, which kept its answer for a new reason
The most interesting row in the correction is the one where the output did not change and the reasoning changed completely.
Right answer, wrong reason
The engine read California as a taxable-sales state, which made hosted software invisible to its 500,000 USD threshold. Software is invisible to that threshold. But California measures gross sales, and the reason software does not count is that the test is scoped to tangible personal property.
A right answer resting on a wrong mechanism is a bug waiting for its conditions. This one had a date attached: SB 122 brings SaaS into scope on 1 January 2027, and only a rule that knows why software was excluded can know what changes then.
- Californiasales tax$500,000Preceding or current calendar year
- New Yorksales tax$500,000and 100 transactionsPreceding four sales-tax quarters
New York's threshold is worded almost identically to California's and behaves oppositely, because state law defines prewritten software as tangible property. Reading the wording alone gives a confident, wrong answer.
What changed, and what it cost to change it
Three things, all of which make the same class of error harder to repeat.
The fixes
- 1Every rule carries its own measureThere is no default any more. A US jurisdiction cannot be added without stating which sales its threshold counts, because the field is required and the build fails without it.
- 2The provenance is published, not impliedThe measure data is served with its confidence, its source and its read date, so anyone consuming the API can see it rests on a secondary guide rather than on 48 statutes.
- 3The traps have tests named after themNew York being tangible-property-inclusive and California being tangible-property-exclusive are both asserted directly. A plausible-looking regression that flips either one fails the build.
Check your own numbers
If you ran a check before 7 August 2026 and any part of your revenue is exempt or non-taxable somewhere, run it again. The states most likely to have moved are the gross and retail ones, which is 42 of the 48.
Re-check two of them now
Your sales into each, in its own currency. Nothing is sent anywhere.
Frequently asked questions
What is the difference between gross sales and taxable sales for nexus?
Gross sales counts everything you sold into the state, including sales that carry no tax and generally sales for resale. Taxable sales counts only the sales that actually carry tax there. A seller whose product is exempt in a state has meaningful gross sales and zero taxable sales, so the basis decides whether they have a registration duty at all.
Do non-taxable or exempt sales count toward economic nexus?
In most states, yes. Of the 48 US jurisdictions tracked here, 30 measure gross sales and 12 measure retail sales, and both of those include exempt sales. Only 6 measure taxable sales alone. Assuming your exempt revenue is invisible to a threshold is wrong in 42 of them.
Was I given a wrong answer before the fix?
If any of your revenue was exempt or non-taxable in a state that measures gross or retail sales, then the headroom you were shown was too large. The error never went the other way: it never invented an obligation you did not have. Re-run the free check and compare, it takes a minute and needs no account.
Why publish a mistake instead of quietly fixing it?
Because this product sells knowing rather than doing, and the only thing that makes knowing worth paying for is being able to check where it came from. A dataset that publishes its sources and its read dates but not its corrections is publishing the flattering half. The gap list on the data page exists for the same reason.
How do I tell which basis a state uses?
Each threshold page on this site states it, and the public API returns it as a measure field with its provenance attached. If you would rather check it yourself, the state's own economic-nexus page is linked from every rule, and the wording to look for is whether it says gross, retail, or taxable sales.
The useful part of an error
An error that only ever under-warned, in a product whose job is to warn, is the kind worth writing down in public. If you sell anything that is exempt somewhere, the basis a state measures on is not a technicality, it is the answer. Check the states you actually sell into.
Sources
- Texas Comptroller: remote sellers - The plainest statement of a gross basis: gross revenue including taxable, nontaxable and exempt.
- California CDTFA: Wayfair and use tax collection - The 500,000 USD test, scoped to tangible personal property.
- Sales Tax Institute: economic nexus state guide - Secondary. The measurement basis for each state is read from here rather than from 48 statutes, which is why the API reports this field at secondary confidence.
Figures on this page are generated from the rules TaxesRadar monitors and each links to the authority that publishes it. Rules change - check the source before acting.
Published by
TaxesRadarMaintains the threshold database
TaxesRadar maintains the registration rules behind this site: 76 VAT, GST and sales-tax thresholds, each read from the authority that publishes it, each carrying the date it was last checked and a link to the source. Where two sources disagree, the rule is marked unknown and the product says nothing rather than averaging them.
See how the rules are maintained - every source, every check date, and what is still unknown.
Never miss a tax threshold
Connect Stripe or Paddle and TaxesRadar watches every threshold in this article - and 73 more - warning you before you cross rather than after.
Read next
The countries where your first sale is the registration
Fourteen countries apply no VAT registration threshold to foreign sellers: the duty starts at sale one. Where they are, and who the published figure belongs to.
Monitoring and guidance, not tax or legal advice. Threshold figures on this page are read live from the rules TaxesRadar tracks and were last verified against their official sources. Rules change - check the linked authority before acting.