E-commerce
E-commerce sales tax compliance
Since Wayfair, selling into a state can create a tax obligation there on volume alone. No office, no staff, no stock required.
Since Wayfair, selling into a state can create a tax obligation there on volume alone. No office, no staff, no stock required.
At a glance
Before 2018 a state could only require you to collect sales tax if you had physical presence there. South Dakota v. Wayfair ended that. States may now impose the obligation based on economic activity alone, and almost all of them have.
Each state sets its own threshold, typically a level of sales into the state or a number of separate transactions, measured over a defined period. Cross it and you are required to register, collect and remit there.
The obligation starts when you cross the threshold, not when you notice. A company that crossed in eighteen states last year and registered in none owes back tax in all eighteen, plus penalties and interest — and it is generally owed whether or not it was ever collected from the customer. It comes out of margin.
Most states now require marketplaces — Amazon, Etsy, Walmart and others — to collect and remit on behalf of their sellers. Genuinely helpful, and routinely over-read.
So a seller across Amazon and their own site typically has a split obligation, and the half they think is handled is often the half creating the registration requirement.
The same item can be taxable in one state, exempt in another, and taxed at a reduced rate in a third. Clothing, groceries, digital goods and SaaS are the usual sources of difficulty, and digital products in particular are treated inconsistently across states.
Nexus monitored continuously against each state's thresholds, registration before the liability builds, filings across states, and marketplace and direct sales reconciled properly against the underlying books.