Online sellers may owe sales tax in states where they have nexus
The question that starts this
“I sell online from one state. Do I really need to collect and remit sales tax in other states where my customers live?”
What this scenario is about
After the 2018 South Dakota v. Wayfair decision, states can require remote sellers to collect sales tax once they exceed economic nexus thresholds (typically $100,000 in sales or 200 transactions in that state). Physical presence is no longer required.
Why this matters
Sales tax liability accumulates quickly across states. Sellers who ignore nexus obligations face back taxes, penalties, and interest from multiple state tax authorities simultaneously.
Common mistake
Assuming sales tax only applies where the business is physically located, or that marketplace facilitator rules cover all sales channels.
Checkpoints to work through
- 1
Know your economic nexus thresholds by state
Most states set the threshold at $100,000 in sales or 200 transactions. Some use only a dollar threshold. Thresholds are measured on a calendar-year or trailing-12-month basis.
- 2
Marketplace facilitator laws shift some obligations
Amazon, eBay, Etsy, and similar platforms collect and remit sales tax on your behalf in most states. But direct website sales and other channels remain your responsibility.
- 3
Register before collecting
Collecting sales tax without a valid permit is illegal in most states. Register for a sales tax permit in each state where you have nexus before you start collecting.
- 4
Taxability rules vary by state and product type
Some states exempt clothing, food, or digital goods. What is taxable in one state may be exempt in another. Product classification matters.
Your next move
Track sales volume by state, check each state's nexus threshold, and register for sales tax permits in states where you have crossed the threshold.