Selling Into Other States as a Freelancer? Watch for Economic Nexus
Freelancers in the US don't pay a federal VAT — there isn't one. Instead, your earnings are subject to self-employment tax and federal income tax. But if you sell taxable goods or digital services remotely across state lines, a separate and often-overlooked issue can catch up with you: economic nexus. Since the Supreme Court's 2018 ruling in South Dakota v. Wayfair, states no longer need you to have a physical presence to require sales tax collection — crossing a dollar or transaction threshold in sales into that state is enough. Most states set the bar at $100,000 in annual sales (sometimes paired with a 200-transaction count), while a handful of larger states like California, Texas, and New York use a higher $500,000 threshold. Once you cross the threshold for a given state, you generally must register there, then start collecting and remitting that state's sales tax on your sales going forward.
Example State Thresholds
| State | Threshold |
|---|---|
| California / Texas | $500,000 (no transaction count) |
| New York | $500,000 + 100 transactions |
| Florida | $100,000 (no transaction count) |
| Most other states | $100,000 + 200 transactions |
If you sell into many states at moderate volumes, it's worth checking each state's threshold individually rather than assuming a single national rule applies — thresholds, transaction counts, and even which services are taxable at all vary significantly state by state.
Frequently Asked Questions
No — there's no federal VAT. Freelancers pay self-employment and income tax, and may owe state sales tax on remote sales.
The requirement, post-Wayfair, for remote sellers to collect a state's sales tax once their sales into it cross a set threshold.
Most states use $100,000 in annual sales; several larger states use $500,000, sometimes with a transaction count too.
※ Estimate only. Thresholds and taxability rules change and vary by state and by product/service type — consult a tax professional or the state's revenue department.