Sales Tax Nexus for Online Sellers: When Do You Have to Collect?
· RKube Services
Since Wayfair, you can owe sales tax in states where you have no physical presence. Here's how economic nexus and marketplace facilitator rules work for online sellers.
A founder selling on Shopify told us recently, "We only collect North Carolina sales tax because that's where we are." Then we pulled the sales-by-state report. They'd crossed $100,000 in sales into two other states the year before and hadn't registered in either.
That's a very common spot to be in. And late August is the right time to look, before holiday volume pushes you over thresholds in more states.
What Changed in 2018
For decades, a state could only require you to collect its sales tax if you had a physical presence there: an office, employees, a warehouse. Online sellers shipping from one state mostly collected only in their home state.
In June 2018, the Supreme Court decided South Dakota v. Wayfair and dropped the physical-presence requirement. States can now require remote sellers to collect based on their sales activity into the state alone. That's called economic nexus.
Source: South Dakota v. Wayfair, Inc., 585 U.S. (2018)
How Economic Nexus Works
Every state that has a sales tax now has some economic nexus rule for remote sellers. The details vary, which is the hard part.
- Dollar thresholds: $100,000 in sales into the state is the most common, but some large states set it higher.
- Transaction counts: some states also use a count, like 200 separate sales, while many have dropped it.
- Measurement period: it may be the prior calendar year, the current year, or a rolling twelve months.
- What counts: some states count total sales, others only taxable sales, and they differ on whether sales through a marketplace count toward your threshold.
Physical presence still creates nexus too. Inventory sitting in a third-party fulfillment warehouse in another state, including Amazon FBA inventory, can create nexus there regardless of sales volume.
Marketplace Facilitator Rules
If you sell through Amazon, Etsy, eBay, or Walmart Marketplace, there's some good news. States now generally require the marketplace facilitator to collect and remit sales tax on the sales it processes for you.
That doesn't mean you can ignore sales tax. If you also sell through your own website, those sales are your responsibility. And some states still expect marketplace sellers to register or file even when the marketplace collects everything. Check each state rather than assuming.
North Carolina as an Example
North Carolina has an economic nexus rule for remote sellers built around $100,000 in gross sales into the state, and it requires marketplace facilitators to collect on sales they facilitate. If you're an out-of-state seller shipping into North Carolina, check the NCDOR's sales and use tax guidance for the current threshold, measurement period, and registration steps.
Source: North Carolina Department of Revenue
If you're based in North Carolina, the same idea runs the other way. Your sales into every other state need to be checked against that state's rules.
Worked Example
A North Carolina skincare brand sold $1.1 million last year. About $300,000 went through Amazon and $800,000 through its own website. Its website sales by state looked like this:
- North Carolina: $210,000 (already registered)
- State A: $135,000 (threshold $100,000)
- State B: $118,000 (threshold $500,000)
- State C: $92,000 (threshold $100,000)
- Everywhere else: under $60,000 per state
On website sales alone, State A is clearly over. State B is well under. State C looks under, but if State C counts marketplace sales toward the threshold and the Amazon sales into State C were $25,000, the total is $117,000, so the brand is over there too. Amazon collected on its own sales, but the brand needs to register in State C and collect on its website orders.
Also check: is any of the brand's Amazon inventory stored in a warehouse in another state? That can create nexus there too.
If You're Already Behind
If you find you crossed a threshold a while ago, don't panic and don't just start collecting quietly. Many states run voluntary disclosure programs that can limit look-back periods and reduce penalties for sellers who come forward first. The right approach depends on how much exposure there is in each state.
How RKube Helps
- We run a sales-by-state report from your books and platforms and compare it to each state's threshold.
- We separate marketplace sales from direct sales so you know which ones you're responsible for.
- We track sales tax collected and owed in your books, so returns tie out to your records.
- If you've crossed thresholds in the past, we help you size the exposure before deciding next steps.
If you want a clear view of where you stand, start with our free 30-day bookkeeping trial or call (984) 234-7030: https://rkubeservices.com/campaign
Final Thoughts
Sales tax nexus isn't a one-time decision. It's something to recheck as you grow, especially heading into the fourth quarter. A half hour with a sales-by-state report now beats finding out from a state notice two years from now.
This is general information, and state rules change. Talk to a professional about your specific sales footprint.
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