Introduction

Sales tax for online sellers is a patchwork of state rules that change frequently. In my 15 years advising e-commerce businesses and working with 500+ clients, the same handful of errors keeps showing up. The good news: most of these problems are fixable with a systematic review, the right documentation, and—when needed—a voluntary disclosure or registration.

Common mistakes and immediate fixes

1) Not registering where you have nexus

  • The mistake: Assuming your home state is the only state where you must register. After South Dakota v. Wayfair (2018), many states enforce economic nexus based on sales or transaction thresholds.
  • The fix: Run a sales audit to identify states that meet economic or physical nexus tests. If you owe back tax, ask about each state’s voluntary disclosure agreement (VDA) to limit lookback periods and penalties. Always confirm thresholds with the state Department of Revenue (DOR) or refer to state summaries (see NCSL) [https://www.ncsl.org].
  • Further reading: see our guide to State Sales Tax Nexus: Practical Tests for Remote Sellers in 2025.

2) Charging the wrong rate or using the wrong sourcing rule

  • The mistake: Applying a single “state” rate without accounting for local sales taxes or confusing origin- vs. destination-based sourcing rules (which determine which jurisdiction’s rate applies).
  • The fix: Use address-based sourcing for each transaction and update rate tables regularly. Sales tax automation software reduces human error—consider solutions like Avalara, TaxJar, or Sovos and verify their updates against state DOR resources.

3) Misapplying exemptions and improper documentation

  • The mistake: Collecting tax on exempt items or failing to accept and store valid resale/exemption certificates; the seller then has exposure for unrefunded amounts.
  • The fix: Maintain signed exemption/resale certificates in the format required by each state and validate certificates before relying on them. Create a standard process to capture, store, and renew certificates and document taxability determinations.

4) Relying on marketplaces without verifying who remits tax

  • The mistake: Assuming platforms fully discharge sales tax obligations. Marketplace facilitator laws exist in most states, but responsibilities vary by state and by type of sale.
  • The fix: Review each marketplace’s reporting and remittance statements for your account. Confirm the state’s marketplace-facilitator rules and keep copies of marketplace sales reports for audits. For more on this, see our article on Sales Tax Compliance for Marketplace Sellers: Registration and Reporting.
  • Note: Marketplace collection can relieve the seller of collection duties in many states—but sellers still need to register in states where they have other filing obligations (inventory, affiliate nexus, or separate sales channels).

5) Inventory stored with 3PLs or using fulfillment providers

  • The mistake: Not recognizing that inventory in a third-party warehouse creates physical presence nexus in the warehouse’s state.
  • The fix: Track all inventory locations and register in states where you store goods. Update your nexus checklist whenever you add fulfillment centers or new 3PL partners.

6) Poor recordkeeping and inconsistent filing

  • The mistake: Incomplete transaction records, missing exemption certificates, and inconsistent sales data, which complicate audits and voluntary disclosures.
  • The fix: Keep transaction-level records (date, amount, tax collected, customer address, product taxability) for at least the period required by states where you file—often 3–7 years. Use an integrated accounting + tax system to centralize records.

How to approach remediation (practical step-by-step)

  1. Inventory review: List states where you sell, store inventory, employ staff, or have affiliates.
  2. Nexus assessment: Compare state economic thresholds and physical-presence triggers (sales dollars, transaction counts, inventory) and mark states needing registration.
  3. Register and file: For current obligations, register with the state DOR promptly and begin collecting and remitting going forward.
  4. Address past liabilities: Contact each state about voluntary disclosure programs (VDAs) to limit exposure. VDAs typically reduce or eliminate penalties and cap lookback periods; terms vary by state.
  5. Fix processes: Implement tax automation, standardize exemption certificate capture, and reconcile marketplace reports monthly.
  6. Get help: Engage a CPA or state tax specialist for complex multistate exposure or audit defense. Professional representation speeds negotiations and VDA enrollment.

Pro tips from practice

  • Automate sourcing and rate updates—manual rate tables are a frequent failure point.
  • Reconcile marketplace settlements to the marketplace’s 1099 and seller reports quarterly.
  • Treat resale certificates like contracts: verify buyer eligibility and keep the certificate in your records before relying on it.

Authoritative references

Internal resources

Professional disclaimer

This article is educational and not personalized tax advice. State rules differ and change; consult a CPA or state tax professional before acting on these recommendations.

If you’d like, I can produce a brief checklist you can use to run your own nexus audit or an email template to start a voluntary disclosure request.