Overview

Expanding sales across states often creates new state sales tax obligations. After the U.S. Supreme Court’s decision in South Dakota v. Wayfair (2018), many states require remote sellers to register once they meet economic or physical nexus rules (often a sales dollar or transaction threshold). In my practice advising online retailers, prompt registration and automation reduce audit risk and back-tax exposure.

Step 1 — Confirm where you have nexus

  • Economic nexus: Most states use a dollar or transaction threshold (commonly $100,000 in sales or 200 transactions, but thresholds vary by state and change). Verify each state’s rule on its Department of Revenue (DOR) website. (See South Dakota v. Wayfair, 138 S. Ct. 2080 (2018)).
  • Physical nexus: Presence of inventory, employees, contractors, trade shows, or a physical office can create nexus.
  • Marketplace facilitator rules: In many states, marketplaces (Amazon, Etsy) collect and remit tax on behalf of third-party sellers — but sellers may still need to register for reporting or exemption certificates.
  • Affiliate, click-through, and marketplace nexus: Referral arrangements, affiliate relationships, or delivery networks can also trigger nexus.

Step 2 — Gather required information

Typical items needed to register: legal business name, doing-business-as (DBA), Employer Identification Number (EIN) or SSN for sole proprietors, business address, NAICS code, estimated monthly sales, owner information, and bank account details for electronic payments.

Step 3 — Complete the state registration

  • Use the state DOR online portal where possible — it’s usually the fastest route to receive a sales tax permit.
  • Some states allow a combined registration for multiple taxes; others require separate registrations.
  • Expect to receive a permit or account ID and the state’s filing frequency assignment (monthly, quarterly, or annually).

Step 4 — Set up collection and remittance

  • Configure your shopping cart or accounting software to collect the correct state and local rates. Many platforms and dedicated services (TaxJar, Avalara, Vertex) can automate rates and filings.
  • Issue and track resale certificates when selling tax-exempt to resellers.
  • Register for state-level seller’s permits and display permit numbers if required.

Filing, payment, and ongoing compliance

  • Filing frequency: States determine frequency based on sales volume. Missing timely filings leads to penalties and interest.
  • Use a compliance calendar to track registration anniversaries, filing due dates, and nexus reviews at least quarterly.
  • Maintain complete records: sales, exemption certificates, shipping documentation, marketplace reports, and returns for at least 3–7 years depending on the state.

Common pitfalls and how to avoid them

  • Assuming thresholds are identical across states. They are not — always check the specific state DOR site.
  • Waiting too long to register. Back taxes, penalties, and interest can be substantial.
  • Overlooking marketplace facilitator rules — marketplaces may collect tax but you still need to reconcile reports and keep exemption documentation.
  • Improper use of resale certificates — misuse can trigger audits and liability.

Practical timeline and costs

  • Registration usually takes days to weeks depending on the state. Some issue permits immediately online; others may require mailed paperwork.
  • Expect administrative time for software setup and customer communication. Professional fees for tax advice or multi-state compliance services vary by complexity.

Tools and professional help

  • Automate: Tax automation tools reduce calculation and filing errors (TaxJar, Avalara).
  • Consult: For complex multi-state exposure, I recommend working with a CPA or sales-tax specialist experienced in ecommerce to perform a nexus study and file voluntary disclosures if needed. In my experience, a short voluntary disclosure can significantly reduce penalties when past taxes are owed.

State resources and further reading

Authoritative sources

  • South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018).
  • Small Business Administration: state registration guidance (https://www.sba.gov).
  • TaxJar and state Department of Revenue sites for current thresholds and registration portals.

Professional disclaimer

This article is educational and does not constitute legal or tax advice. Rules and thresholds change frequently; consult a CPA or state DOR for guidance tailored to your business.