Sales Tax Nexus for a New Apparel Brand, Without the Panic
By The Velocity Wear Team
Every US brand hits this eventually and most hit it later than they should, usually when a state sends a letter. Sales tax in the United States is administered state by state, sometimes county by county, and clothing sits in an awkward category because several states treat it differently from general merchandise. None of this is a reason to panic. It is a reason to know which questions apply to you.
What follows is orientation, not advice — thresholds and rules change and a CPA who knows your states is worth the fee. But knowing the shape of the problem tells you when to make that call.
Nexus is the whole concept
Nexus is the connection that gives a state the right to make you collect its sales tax. It used to require physical presence. Since the Supreme Court decision in Wayfair in 2018, states can also assert economic nexus, based on your sales into that state crossing a threshold — usually a dollar amount, sometimes a transaction count, and the numbers differ by state.
The practical version for a new brand: you almost certainly have nexus in your home state from day one, and you acquire it elsewhere as you grow. It is not something you opt into. It is something that happens to you, and the thing to do is track sales by state so you can see it coming rather than discover it retrospectively.
Clothing is often treated specially
This is the apparel-specific wrinkle. Some states exempt clothing from sales tax entirely. Some exempt it below a price threshold per item, which means the same shirt is taxable or not depending on what you charge. Some run annual sales tax holidays where apparel is exempt for a weekend. And several states have no general sales tax at all.
If you sell a $28 tee and a $95 hoodie, it is entirely possible for one to be taxable and the other exempt in the same state under a price-threshold rule. That is not an edge case, it is normal, and it is why apparel brands cannot just apply a flat rate and hope.
Marketplaces do most of it for you
Marketplace facilitator laws now require the big platforms to collect and remit sales tax on sales made through them. If your entire volume goes through a marketplace, most of this is handled — though you may still have filing obligations, and the sales usually still count towards your nexus thresholds.
The moment it becomes your problem is when you launch your own store. A brand that has been selling through a marketplace for a year and then opens a direct site can find it already has economic nexus in several states on day one of that site, because the threshold was crossed by the marketplace volume.
What to actually do
- 1Register in your home state, and understand whether clothing is taxable there and at what price point.
- 2Track revenue and order count by state from your first sale. Your store platform does this; you just have to look at it.
- 3Set a review point — quarterly is plenty early on — where you check nothing has crossed a threshold.
- 4Use tax software once you are in more than two or three states. Doing it by hand across a dozen jurisdictions is a bad use of a founder's time.
- 5Talk to a CPA before you are in trouble rather than after. The conversation is much cheaper in that direction.
Why this affects how you buy stock
Indirectly, but it does. Sales tax is a cash flow instrument: you collect it, you hold it, you remit it, and in between it looks exactly like money in your account. Brands that treat collected tax as working capital and spend it on inventory get an unpleasant surprise at filing. Keep it separate, and plan inventory purchases against money that is actually yours.
Ordering in smaller, more frequent runs helps here for reasons that have nothing to do with tax and everything to do with the same discipline — less cash tied up at any one moment, and more of your balance genuinely available. Our tiers reward volume, but a 20-piece minimum per design means the volume decision stays yours rather than the supplier's.
