Quick answer

Online marketplaces must register for sales tax in any state where they establish nexus — a legal connection created by physical presence (warehouses, offices, employees) or economic presence (sales revenue or transaction thresholds). Since the Supreme Court’s South Dakota v. Wayfair, Inc. ruling (2018), states may impose economic nexus and marketplace‑facilitator collection responsibilities; thresholds and rules still vary by state, so use this checklist to identify likely triggers and next steps. (See South Dakota v. Wayfair, Inc., 138 S. Ct. 2080 (2018): https://supremecourt.gov/opinions/17pdf/17-494_j4ek.pdf)

Why a checklist matters

States enforce sales and use tax aggressively. If your marketplace fails to register where it has nexus, liabilities can include back taxes, interest, penalties, and compliance headaches. A short, repeatable Nexus checklist helps finance and operations teams evaluate exposure regularly and act before an audit or a marketplace facilitator demand letter arrives.

Nexus checklist (step-by-step)

Use this checklist at least quarterly and whenever you add a new state activity (new fulfillment center, ad campaign, major vendor onboarding).

  1. Inventory physical‑presence triggers
  • Do you store inventory in a state-owned or third‑party warehouse (including Amazon FBA or 3PL)? If yes, that usually creates physical nexus and a registration requirement. (Check the state’s tax agency — e.g., California Dept. of Tax and Fee Administration: https://www.cdtfa.ca.gov)
  • Do you have employees, sales reps, or significant contractor presence in the state? Remote employees can create nexus; document job locations and days worked.
  • Do you maintain offices, pickup locations, or permanent trade show presence?
  1. Review economic‑presence thresholds
  • Compare your gross marketplace sales into each state against that state’s threshold (many are set at $100,000, $200,000, or $500,000 for sales or require a specific transaction count). For marketplace facilitators, some states use lower or separate thresholds. Example thresholds: California $500,000; New York $500,000 and 100 transactions; Texas $500,000; Florida $100,000 — always confirm with the state agency. (See state tax websites: New York DTF https://www.tax.ny.gov, Texas Comptroller https://comptroller.texas.gov/taxes/sales/)
  1. Determine whether marketplace facilitator laws apply
  • Most states now require marketplace facilitators (platforms that list and fulfill sales for third‑party sellers) to collect and remit sales tax on behalf of sellers. Check the specific definition and exemptions in each state — facilitator rules can create collection duties even if sellers individually are below thresholds.
  1. Check third‑party seller arrangements and contracts
  • Who is the seller of record? How do contracts allocate responsibility for tax collection? Even when the seller is nominally responsible, marketplace facilitator rules may shift the collection duty to the marketplace operator.
  1. Assess referral, affiliate, and advertising activities
  • Referral fees, affiliate programs that create in‑state agents, or targeted ad operations can create nexus in some states. Document how affiliates operate and whether they create a physical or economic connection.
  1. Review software, hosted services, and digital goods
  • Some states tax digital goods and SaaS; selling taxable services into a state can establish economic nexus. Confirm taxability definitions for each state.
  1. Run transaction‑level reconciliation
  • Pull customer location, shipping destination, item tax codes, sale amount, and date for the last 12 months. Reconcile totals by state and count transactions per state; compare to thresholds.
  1. Confirm registration and collection status
  • For any state where a trigger is met, register for a sales tax permit, begin collecting at the correct rate(s), and file returns. Consider marketplace facilitator registration categories, if available.
  1. Keep documentation for voluntary disclosures or audits
  • Maintain the quarter-by-quarter summaries showing when thresholds were exceeded, nexus evaluations, and the date you registered. If you missed registration, explore voluntary disclosure programs offered by many states to reduce penalties.

Practical examples (realistic scenarios from my practice)

  • Example 1: Fulfillment center trigger
    An online marketplace integrated with a 3PL in Ohio to speed up shipping. Within six months, the marketplace had significant inventory stored in Ohio warehouses. That physical presence required sales tax registration in Ohio; once registered, the marketplace had to collect tax on sales shipped from those locations.

  • Example 2: Economic nexus by transaction volume
    A marketplace without U.S. warehouses crossed $600,000 in sales shipped to California customers over a year. California’s $500,000 economic threshold required registration and collection even without a brick‑and‑mortar footprint.

  • Example 3: Marketplace facilitator rule
    A platform lists thousands of third‑party sellers and facilitates checkout and payment. Several states’ marketplace facilitator laws required the platform to collect and remit sales tax for third‑party sales — shifting the compliance burden from individual sellers to the marketplace operator.

Registration process and immediate next steps

  1. Confirm legal entity status and EIN for each entity operating the marketplace. States often require the federal EIN to register.
  2. Register online with the state tax agency and obtain a sales tax permit before you begin collecting — many sites have expedited online registration portals. Link: California CDTFA https://www.cdtfa.ca.gov
  3. Implement collection in your checkout flow and mapping to state and local rates; use tax automation software or a certified provider.
  4. File timely returns even if the liability is zero for a filing period. Missing returns can escalate enforcement.

Recordkeeping and systems controls

  • Keep a pivot table or database that summarizes sales and transactions by customer shipping address (not just billing).
  • Tag transactions by seller, facilitator, and whether you fulfilled the order. This helps allocate tax responsibilities for marketplace sales.
  • Retain contracts with 3PLs and sellers showing where inventory is stored and who controls shipment — these documents support nexus decisioning in an audit.

Common pitfalls and how to avoid them

  • Pitfall: Assuming marketplace‑facilitator laws remove all seller obligations. Avoid this; sellers may still need to register for tax-exempt resale certificates or file filings in some states.
  • Pitfall: Using only billing addresses. Use shipping destination to evaluate economic nexus.
  • Pitfall: Not monitoring for changes. States update thresholds and definitions; assign an owner (finance or tax) to watch changes.

Audit risk, penalties, and voluntary disclosure

States can assess uncollected sales tax for multiple years. Many states offer voluntary disclosure or amnesty programs where penalties are reduced if you register and remit before an audit. If you discover past noncompliance, contact the state revenue department to explore voluntary disclosure options.

Action checklist (what to do this week)

  • Pull 12 months of sales and transaction counts by destination state.
  • Flag any states where sales or transactions hit common thresholds ($100k–$500k or 200 transactions).
  • Check marketplace‑facilitator rules for flagged states.
  • Register and start collecting where a trigger is met; consult a specialist for voluntary disclosure where needed.

Interlinks (related FinHelp guides)

Sources and authoritative references

Professional note from the author

In my practice advising online marketplaces, the two most common oversights are (1) failing to treat third‑party fulfillment locations as nexus triggers and (2) ignoring marketplace‑facilitator statutes that shift collection responsibility to the platform. If your marketplace has cross‑border or multi‑state complexity, prioritize a short compliance project: data extraction → threshold analysis → registration plan.

Disclaimer

This article is educational and does not constitute tax or legal advice for your specific facts. Laws and state thresholds change frequently; consult a CPA or state tax attorney before relying on this guidance for a compliance decision.