Quick overview

States can require online sellers to collect sales tax based on different nexus tests (physical presence, economic activity, inventory storage, or marketplace rules). After the 2018 Supreme Court decision in South Dakota v. Wayfair, Inc., states gained broader authority to enforce economic nexus rules—so many remote sellers now must register and collect tax in states where they exceed thresholds (commonly $100,000 in sales or 200 transactions, but thresholds vary by state) (U.S. Supreme Court, 2018; IRS).

How responsibilities typically break down

  • Determine nexus: Check each state for physical presence (offices, employees, inventory), economic nexus thresholds, click‑through or affiliate nexus, and inventory stored with third‑party fulfillment (e.g., FBA).
  • Register: Apply for a state sales tax permit before collecting tax in that state.
  • Collect accurate tax: Charge the correct rate and apply product taxability rules (many states tax goods differently from services and digital products).
  • File and remit: File returns and remit taxes according to each state’s cadence (monthly, quarterly, annual, or special schedules).
  • Keep records: Maintain transaction-level records, exemption certificates, and nexus analyses for audits.

In my practice advising e-commerce clients, failing to register before collecting often creates avoidable exposure to penalties and back taxes; early registration and automation reduce that risk.

Practical steps to comply (action checklist)

  1. Map your sales and shipping destinations for the last 12 months.
  2. Compare your activity to each state’s nexus rules; if in doubt, treat the state as a potential filing state and consult its Department of Revenue.
  3. Register for a sales tax permit in states where nexus exists.
  4. Configure your checkout system to collect the proper tax rates and exemptions.
  5. File returns and remit by each state’s deadlines; retain filings and exemption certificates for at least 3–5 years.

For a compact list of registration and compliance steps, see our Sales Tax Compliance Checklist for Small Online Retailers (FinHelp.io).

Special situations to watch

  • Marketplace facilitator laws: Many marketplaces (Amazon, eBay, Etsy) now collect and remit tax on behalf of sellers for sales on their platforms; however, sellers may still have separate obligations if they make direct sales or hold inventory (state rules vary). Check sales channels carefully.
  • Fulfillment centers and third‑party warehouses: Storing inventory in another state (including Fulfillment by Amazon) commonly creates nexus; see our guide on State Sales Tax Registration for Sellers Using Fulfillment by Amazon (FinHelp.io).
  • Digital goods and services: Taxability for downloads, streaming, SaaS, and bundled offerings differs across states; confirm product classification with the state revenue department or a tax advisor.

Common mistakes and how to avoid them

  • Assuming one-size-fits-all: Nexus, rates, and exemptions differ by state—don’t generalize.
  • Waiting to register: Retroactive registration often brings penalties and interest.
  • Poor recordkeeping: Missing exemption certificates or transaction logs increases audit risk.

Tools and resources

  • Automate rates and filing with reputable software to reduce manual errors (TaxJar, Avalara, or built-in e-commerce tax engines) (TaxJar).
  • Check federal and state guidance: IRS sales and use tax overview (IRS) and state Department of Revenue sites for up‑to‑date rules.

When to get professional help

If you sell in multiple states, use marketplaces, or store inventory out of state, consult a sales tax professional or CPA. In complex cases I handle, an initial nexus review and a documented compliance plan typically pay for themselves by avoiding penalties and simplifying filings.

Related FinHelp.io resources

Final note and disclaimer

This article explains general principles and common state practices as of 2025. It is educational and not legal or tax advice. For tailored guidance about your business’s specific obligations, consult a licensed tax advisor or your state revenue department (IRS: Sales and Use Tax, https://www.irs.gov/businesses/small-businesses-self-employed/sales-and-use-tax).