If you sell physical goods online and you're past your first $100,000 in revenue, sales tax is now your biggest compliance problem. Bigger than income tax. Bigger than payroll. And new sellers consistently walk into it because the federal income tax everyone talks about is a once-a-year event — but sales tax is a monthly event in 45 states with their own rates, rules, and rebates.
What changed: South Dakota v. Wayfair (2018)
Before 2018, you only had to collect sales tax in states where you had "physical nexus" — a warehouse, an employee, a permanent inventory location. The Wayfair Supreme Court decision changed that. States can now require you to collect sales tax once you cross economic nexus thresholds — usually $100,000 in sales or 200 transactions into the state per year. (A handful of states use different numbers; California is $500,000.)
Translation: you can now owe sales tax in a state you've never set foot in.
The marketplace facilitator wrinkle
If you sell on Amazon, Etsy, eBay, Walmart Marketplace, or most large platforms, those platforms are now "marketplace facilitators" in most states — they collect and remit sales tax on your behalf. That handles a chunk of the problem if you sell exclusively through marketplaces.
But: your direct sales through your own Shopify or WooCommerce site are still your responsibility. And many sellers do both — Etsy + Shopify, Amazon + a direct site. Each side needs its own treatment.
The three-step playbook for new e-commerce sellers
- Track sales by ship-to state. Your e-commerce platform can do this; your accountant can do this. You need a running tally of revenue and order count per state.
- Watch for economic nexus thresholds. When a state's tally crosses the threshold, you have a sales tax obligation in that state going forward. Some states give you a grace period; others don't.
- Register, collect, file, remit. In that order. Don't collect tax you haven't registered to collect — that's actually illegal in most states. Register first, then turn collection on in your platform, then file returns on the state's required cadence.
Filing cadence is the silent monster
Most new sellers expect sales tax to be quarterly. Sometimes it is. Often it isn't. High-volume sellers file monthly. Some states require pre-payments mid-month. A handful require annual. The cadence is set by the state based on your projected volume.
If you cross economic nexus in 12 states, that can turn into 144 filings a year. We've seen sellers genuinely surprised by this — they thought "online business" meant low-overhead, and the compliance overhead is now their second-biggest expense after fulfillment.
Tools versus services
There are good automation tools — Avalara, TaxJar, Anrok — that handle the rate calculation and filing for a per-state monthly fee. They're not free; budget $500–2,000 a month for a multi-state business. But they're cheaper than not collecting and getting hit with a state audit later.
Where we tend to come in: figuring out which states you have nexus in, getting you registered in each, choosing the right tool, configuring it, and being the human who reads the state notices when something inevitably goes wrong. Tools don't read mail; we do.
The biggest sales tax mistake we see new sellers make is collecting tax in a state where they aren't registered. The customer thinks they paid sales tax. The seller thinks the state is getting it. The state never sees the money — and treats the collected-but-unremitted tax as theft when they finally find out.
Where to start if you're behind
If you've been selling for a year or two and never registered anywhere outside your home state, you're probably behind. Most states have voluntary disclosure programs that let you come forward, pay back tax (usually with limited lookback) without penalty, and get into compliance. The math heavily favors voluntary disclosure over waiting for a state to find you.
Either way, let's get a baseline. Sales tax compliance is fixable; what makes it expensive is letting it pile up.