Ecommerce Sales Tax in Plain English: Nexus, Marketplaces, and You

A seller doing $400,000 a year across Amazon, Etsy, and a Shopify store recently asked us a simple question: "Do I owe sales tax anywhere?" The honest answer was: probably less than you fear on the marketplaces, possibly more than you think on the Shopify store, and the only way to know is to check state by state. That answer frustrates people, but it is the truth, and this guide explains why.

Ecommerce sales tax in the United States is not one system. It is roughly fifty systems, each with its own thresholds, definitions, and filing rules. The good news: for most marketplace sellers, the platforms now handle the bulk of collection. The bad news: "the platform collects" is not the same as "you have nothing to do." Here is the plain-English version — with the standing caveat that this is general education, not advice for your situation. State rules change, and a sales tax professional should confirm anything you act on.

What Sales Tax Nexus Actually Means

Nexus is the legal term for a connection between your business and a state that is strong enough for that state to require you to collect and remit its sales tax. No nexus, no obligation to that state. Nexus in a state, and you may need to register, collect, and file there — even if you have never set foot in it.

There are two main ways an online seller creates nexus. Physical nexus is the traditional kind: an office, an employee, a warehouse, or — critically for Amazon sellers — your inventory sitting in a fulfillment center. If FBA stores your stock in a state, many states treat that as physical presence. Economic nexus is the newer kind, and it is based purely on how much you sell into a state, with no physical footprint required.

• •Physical nexus: offices, employees, contractors, trade show appearances (in some states), and inventory — including FBA inventory you did not choose to place there.
• •Economic nexus: crossing a state's sales revenue or transaction-count threshold, even with zero physical presence.
• •Nexus is evaluated per state. You can have nexus in five states and none in the other forty-five.

Economic Nexus After Wayfair

Until 2018, states generally could not force out-of-state sellers to collect sales tax unless the seller had physical presence there. The Supreme Court's decision in South Dakota v. Wayfair changed that: states may now require collection based on economic activity alone. Nearly every state with a sales tax has since adopted an economic nexus law.

The thresholds vary by state and change over time, so treat any specific number you read — including here — as a starting point to verify, not a rule to rely on. A commonly cited pattern is a threshold in the neighborhood of $100,000 in annual sales into the state, and some states also use (or have dropped) a transaction-count test such as 200 separate orders. States differ on which sales count toward the threshold (gross sales vs. taxable sales, marketplace sales included or excluded) and on the measurement period (calendar year vs. trailing twelve months). Always check the current rules on each state's revenue department site or with a professional.

Illustrative example: suppose a state uses a $100,000 gross-sales threshold measured over the previous calendar year. You sold $85,000 into that state via your own site last year — no nexus yet. This year you cross $100,000 in September. In that scenario you would typically need to register and begin collecting within a defined window after crossing. The exact trigger, grace period, and whether marketplace sales count toward your total all depend on that specific state's law.

Marketplace Facilitator Laws: Amazon, eBay, and Etsy Collect for You

Here is the part that takes most of the pressure off marketplace sellers. Every US state with a sales tax has enacted some form of marketplace facilitator law, which shifts the obligation to collect and remit sales tax on marketplace orders from the seller to the marketplace itself. On orders through Amazon, eBay, Etsy, Walmart Marketplace, and similar platforms, the marketplace calculates, collects, and remits the tax. You will see it flow through your settlement reports, but it is not your money and not your liability to remit.

This is why a seller doing seven figures purely on Amazon may have a surprisingly light sales tax workload. But there are three common traps. First, some states still require you to hold a sales tax registration or file returns (sometimes zero-due returns) even when the marketplace collects everything. Second, marketplace sales may still count toward your economic nexus threshold for the sales you make outside the marketplace. Third, facilitator laws cover sales tax — not necessarily income tax, franchise tax, or other registrations that nexus can trigger. A professional can tell you which of these apply to your states.

Where You Still Owe: Own-Site Sales and Edge Cases

If you sell on your own website — Shopify, WooCommerce, BigCommerce, a custom cart — there is no facilitator standing between you and the state. For those direct sales, you are the merchant of record. Where you have nexus, you must register, collect the correct rate at checkout, and remit it on the state's filing schedule.

Your home state is almost always on the list: operating the business from there is physical presence. Beyond that, your direct-sales exposure depends on where your customers are and where your inventory sits. A practical example: a seller with $300,000 in Amazon sales and $90,000 in Shopify sales might have collection obligations on the Shopify side only in their home state plus any states where FBA inventory creates physical nexus or where direct sales crossed an economic threshold. The Amazon side is largely handled by the facilitator law — but it may still drag registration or filing duties along with it in certain states.

Other edge cases worth flagging to your advisor: selling taxable digital goods (states treat these very differently), shipping and handling charges (taxable in some states, not others), product-specific exemptions like clothing or groceries, and wholesale sales, which generally require collecting valid resale certificates from your buyers instead of tax.

How to Assess Your Ecommerce Sales Tax Exposure

Before registering anywhere, run a structured nexus review. This is the exercise a sales tax professional will walk you through, and doing the data-gathering yourself first makes that engagement faster and cheaper.

Registration and Filing Basics

Once you know where you have nexus, register before you start collecting — collecting tax without a permit is illegal in most states, even with good intentions. Registration happens through each state's department of revenue, usually online, and you will receive a permit number and an assigned filing frequency (monthly, quarterly, or annually, typically based on your expected volume).

Filing means reporting your sales into the state, the tax you collected, and remitting it by the deadline. Many states require a return every period even if you collected nothing. If you discover you should have been collecting for a while and were not, do not just quietly register — talk to a professional about a voluntary disclosure agreement first. VDAs can limit how far back a state looks and reduce penalties, but the option often disappears once the state contacts you. This is one of the highest-leverage moments to pay for an hour of expert advice.

Keeping Your Books Clean for Sales Tax

The accounting side trips up more sellers than the legal side. Sales tax you collect is never revenue — it is a liability you are holding on the state's behalf. If marketplace payouts land in your books as one lump number, it is easy to overstate income by booking collected tax as sales, or to lose track of what the marketplace remitted versus what you owe directly.

The clean pattern: record marketplace-collected tax so it nets out of your revenue (the facilitator remits it, so it should not sit in your liability account), and record tax you collect on direct sales to a sales tax payable liability that you clear when you file. Tools that post summarized settlement journals to QuickBooks Online or Xero — BeanHawk does this across channels — keep those lines separated automatically, so your P&L shows real revenue and your balance sheet shows exactly what you owe. Clean books also make a nexus review painless: sales-by-state numbers are a report away instead of a spreadsheet archaeology project.

One final repetition, because it matters: state sales tax rules change frequently, thresholds get amended, and your facts are specific. Use this guide to walk into a conversation with a CPA or state-and-local-tax specialist informed — not to walk past that conversation.