Before 2018, the rule for US sales tax was relatively simple: if you didn't have a physical presence (office, warehouse, employees) in a state, you didn't need to collect sales tax there. Then came South Dakota v. Wayfair, and everything changed.
Today, every eCommerce seller — regardless of where they're located in the world — could owe sales tax in dozens of US states. The question isn't whether you have an obligation. The question is: do you know which states you're liable in?
⚠ Selling to US customers without collecting required sales tax exposes you to back taxes, interest, penalties, and in some cases, personal liability. Ignorance is not a legal defence.
What Is Sales Tax Nexus?
Nexus is the legal connection between your business and a state that triggers a sales tax obligation. Before Wayfair, nexus was almost exclusively physical. After Wayfair, states can impose "economic nexus" — meaning if you sell enough into a state, you have a tax obligation there even with zero physical presence.
There are now several types of nexus that eCommerce sellers must be aware of:
1. Economic Nexus (Most Common for eCommerce)
Created when you cross a state's sales or transaction threshold. The most common thresholds are:
| Threshold Type | Standard Amount | States Using This |
|---|---|---|
| Sales revenue only | $100,000/year | Most states |
| Transactions only | 200 transactions/year | Some states |
| Sales OR transactions | $100K or 200 transactions | Many states |
| Sales AND transactions | $100K AND 200 transactions | Fewer states |
✓ Important: Some states have lower thresholds. Pennsylvania uses $100K only (no transaction count). Kansas uses $100K. Always check individual state rules — they are not uniform.
2. Physical Nexus (FBA Creates This)
If you use Amazon FBA, your inventory sits in Amazon fulfilment centres across multiple states. Having inventory in a state creates physical nexus in that state — even if you never intended to have a presence there. Amazon operates fulfilment centres in 27+ states, meaning most FBA sellers have nexus in far more states than they realise.
3. Click-Through Nexus & Affiliate Nexus
Some states impose nexus if you have affiliates or referral partners in their state who send you business. Less common for pure eCommerce sellers, but worth knowing.
Which States Have Sales Tax? (And What Rate?)
45 states plus Washington DC have a state sales tax. The 5 states with no sales tax are: Alaska, Delaware, Montana, New Hampshire, and Oregon.
💡 The Complexity Goes Deeper
Beyond state-level tax, many cities and counties add their own local rates on top. In some states (like Louisiana and Colorado), local tax rules are incredibly complex. The total rate you should be collecting varies by the buyer's exact ZIP code — not just their state.
Step-by-Step: How to Achieve Sales Tax Compliance
Step 1: Conduct a Nexus Analysis
Before you register anywhere, you need to know where you have nexus. This involves reviewing:
- Your historical sales data by state for the past 12 months
- Your Amazon FBA inventory locations
- Any other physical presence (remote employees, contractors, trade show participation)
At TSA & COO, we run this analysis for every new client as part of onboarding. Most sellers discover they have nexus in 5–15 states they weren't collecting for.
Step 2: Register in Each Nexus State
Once you know where you have nexus, you must register for a sales tax permit in each state before you start collecting. You cannot collect sales tax without a permit, and you cannot register retroactively to avoid prior liability. Registration timelines vary:
- Most states: immediate online registration via the state revenue portal
- Some states require a waiting period before you can collect
- Colorado requires registration with both the state and individual home rule cities
Step 3: Configure Your Selling Platforms to Collect
Once registered, enable sales tax collection in each platform:
- Amazon: Seller Central → Tax Settings → Tax Collection Model. Note that Amazon is a marketplace facilitator in all 45 states — they collect and remit on your behalf for all Amazon sales.
- Shopify: Settings → Taxes and Duties → configure state rates
- eBay / Etsy: These are also marketplace facilitators — they handle collection and remittance for marketplace sales, but you may still owe use tax on seller fees
✓ Amazon as Marketplace Facilitator: Amazon collects and remits sales tax on your behalf in all MFA states. However, you are still responsible for: 1) registering in FBA nexus states (otherwise you're non-compliant even if Amazon collects), 2) filing returns even if showing zero liability, and 3) any sales through your own website or other non-MFA channels.
Step 4: File Returns on Time
Each state has its own filing frequency (monthly, quarterly, annual) based on your sales volume. Filing requirements include:
- Showing total sales into the state
- Showing taxable vs exempt sales
- Reporting tax collected by marketplace facilitators separately
- Remitting any tax collected directly (e.g., from your own website)
Step 5: Manage Ongoing Compliance
Sales tax compliance isn't a one-time task. You need to:
- Monitor your sales thresholds in states where you're not yet registered
- File returns in all registered states by their due dates
- Update your tax settings when Amazon adds new fulfilment centres
- Stay informed of rate changes (states frequently adjust local rates)
Nexus Analysis — Done For You
Our tax team will analyse your sales data, identify every state where you have nexus, handle all registrations, and file your returns on time — every time. Starting from our Growth plan at $349/mo.
Book Your Free Nexus Review →What Happens If You've Been Non-Compliant?
If you've been selling into states where you have nexus without collecting sales tax, you have back liability. The good news: most states have voluntary disclosure programs (VDAs) that allow you to come forward, pay a limited look-back period of liability (usually 3 years), and receive penalty waivers. The bad news: you need to act before a state contacts you. Once an audit is triggered, VDA options disappear.
At TSA & COO, we manage voluntary disclosure negotiations on behalf of clients and have helped sellers settle significant multi-state back liability with minimal penalties. Contact us for a confidential assessment of your situation.
Tools for Sales Tax Management
Managing multi-state sales tax manually is nearly impossible at scale. We recommend:
- TaxJar — Automates return filing in all states. Best for Shopify and WooCommerce sellers.
- Avalara AvaTax — Enterprise-grade solution for high-volume multi-channel sellers.
- Taxify — Good mid-market option that integrates with most platforms.
All of these require accurate nexus setup to work correctly — which is where having an eCommerce accountant becomes essential.