---
title: "How Thresholds Work"
description: "This article explains what an economic nexus threshold is, how states set their rules, and how TaxCloud applies those rules to your sales activity."
canonical_url: "https://support.taxcloud.com/articles/how-thresholds-work-CqAi7aZyW5"
md_url: "https://support.taxcloud.com/articles/how-thresholds-work-CqAi7aZyW5.md"
---
# How Thresholds Work

This article explains what an economic nexus threshold is, how states set their rules, and how TaxCloud applies those rules to your sales activity.

Each state sets its own rule. TaxCloud measures your activity against that rule every day. The rule determines:

* what gets counted
* the measurement window
* whether marketplace sales are included.

Status updates once per day and the specific rule that applies to each state is shown at the top of its Threshold Details page.

### **What gets measured**

Some states look at sales volume, some look at transaction count, some require *both*, some count *either*. On states that measure the two metrics, you will see two progress bars. Depending on the state's rule, crossing one of them may be enough to trigger the threshold on its own.

### **The look-back window**

A state's threshold is measured against a *completed* period, not your live running total. Common patterns include:

* **Previous calendar year**: For example, Michigan. Your 2025 sales determine your 2026 status. Nothing you do in 2026 changes it.
* **Rolling twelve months:** For example, Connecticut, which uses the twelve months ending September 30. The completed period is October through September of the prior year; October-to-now is the informational (gray) period.
* **Previous or current calendar year:** A few states count both. In these, crossing the threshold this year flips your status right away, and the current-year bar is not just informational.
* **Trailing four quarters or fixed 12-month periods**: other variations you may see.

### **Whether marketplace sales count**

Orders through Amazon, eBay, Walmart, and similar marketplaces count toward thresholds in some states and not in others. TaxCloud applies the correct rule for each state automatically.

The specific rule that applies is shown at the top of each state's Threshold Details page.

Once you understand how state rules and measurement periods work, the next step is reading your actual progress against them in your TaxCloud account. See [How TaxCloud tracks your economic nexus thresholds](https://support.taxcloud.com/en-us/articles/how-taxcloud-tracks-nexus-thresholds-Iy2wKNHl0P) for how to read the status chips, progress bars, and alerts.