Background

Sales tax collection in the U.S. has shifted significantly since the 2018 Supreme Court decision in South Dakota v. Wayfair, Inc., which allowed states to require remote sellers to collect sales tax based on economic activity rather than a physical presence. That change created recurring multistate compliance obligations for many small online businesses.

Why a checklist matters

A concise, prioritized checklist turns complex, state-by-state rules into repeatable business tasks: determine nexus, register where required, collect the right tax, file on time, and keep audit-ready records. In my consulting work I’ve seen small sellers that skipped a single registration face interest, penalties, and long voluntary disclosure negotiations.

Step‑by‑step checklist (actionable)

  1. Determine nexus at the state level
  • Check economic thresholds (sales amount and/or transaction count) and physical triggers (warehouse, employees, trade shows, inventory providers). Thresholds vary by state and can include a transactions test as well as a dollar test.
  1. Register for a sales tax permit where nexus exists
  1. Know who collects the tax (you vs. marketplace facilitator)
  1. Charge the correct tax rates and apply product rules
  • Rate and taxability depend on product type (tangible goods, digital goods, subscriptions) and destination rules. Use taxability matrices for high‑volume product lines.
  1. Collect and manage resale certificates
  • Accept valid resale certificates when customers claim exemption, keep copies organized, and follow state retention rules.
  1. File and remit on schedule
  • Filing frequency (monthly, quarterly, annual) depends on state rules and your tax liability. File even if you have no tax to report when a zero return is required.
  1. Maintain audit-ready records
  • Keep sales journals, exemption certificates, marketplace reports, and monthly remittance records for at least the period required by each state (commonly 3–7 years).
  1. Run periodic nexus and registration reviews
  • Re‑evaluate nexus triggers every quarter or after any change in sales channels, fulfillment, or staffing.
  1. Use automation where possible
  1. Consider voluntary disclosure programs (VDP) for past liabilities
  • If you discover unregistered activity, many states offer VDPs that reduce penalties when you proactively disclose prior tax liabilities. Contact the state DOR or your tax advisor.

Real‑world examples

  • A boutique apparel seller that used a single fulfillment partner in multiple states missed registrations in two states and faced interest plus penalties. After voluntary disclosure and automation, they centralized collection and reduced future risk.
  • A maker selling on an online marketplace assumed the marketplace collected tax for all sales. After reviewing monthly marketplace reports, they found several direct sales routed through their site that required separate registration.

Who is affected

Any online retailer that sells to customers in multiple states may be affected. The requirement to register and collect depends on each state’s nexus rules — not necessarily where your business is physically located. Sellers of physical goods, certain digital goods, and taxable services should pay particular attention.

Common mistakes to avoid

  • Assuming a marketplace always collects tax for you.
  • Ignoring small or infrequent sales into a state — transaction counts can trigger nexus.
  • Failing to store resale certificates correctly.
  • Using incorrect origin/destination rules that miscalculate tax at checkout.

Professional tips

  • Start with a quarterly nexus review tied to your sales reports.
  • Use automation for rate lookup and return preparation to reduce manual errors.
  • Maintain a single centralized folder (cloud or local) for exemption certificates and DOR communications.
  • When expanding fulfilment (e.g., third‑party logistics), verify whether inventory locations create nexus.

Short FAQs

Q — What happens if I miss a filing deadline?
A — States may assess interest and penalties. Many offer penalty relief or VDPs for proactive disclosure; contact the state DOR or a tax professional promptly.

Q — Do I need to register in every state where I get an occasional sale?
A — Not always; you only register where you meet that state’s nexus tests. However, transaction counts and remote‑seller thresholds can trigger registration even with low dollars.

Q — Can I rely entirely on tax software?
A — Automation reduces errors but does not replace registration and governance. Software must be paired with periodic manual reviews and documentation.

Professional disclaimer

This article is educational and does not constitute legal or tax advice. State rules differ and change; consult a certified tax professional or state Department of Revenue for guidance tailored to your business.

Authoritative sources

Related FinHelp resources

If you want, I can convert this checklist into a printable worksheet or a quick quarterly review checklist tailored to your product mix and sales channels.