Sales Tax Nexus for eCommerce Sellers: What Triggers It and How to Stay Compliant

Why Online Sellers Suddenly Owe Sales Tax Everywhere

For years, online sellers only worried about sales tax where they had a physical presence. That changed with the South Dakota v. Wayfair decision, which let states require out-of-state sellers to collect sales tax based on their economic activity in the state. Today, an e-commerce business can owe sales tax in states it's never set foot in.

Physical Nexus vs. Economic Nexus

Physical nexus is the old rule: you have a connection to a state through an office, employees, inventory (including inventory stored in a marketplace's warehouse), or other physical presence.

Economic nexus is the newer rule: you cross a state's sales or transaction threshold and trigger an obligation to collect — no physical presence required. Many states set the bar around $100,000 in sales or 200 transactions per year, though the exact numbers vary by state.

Watch Out for Marketplace Inventory

If you sell through a fulfillment program and your inventory sits in warehouses across several states, that stored inventory can create physical nexus in each of those states — a surprise that catches a lot of sellers.

Marketplace Facilitator Laws Help (Sometimes)

Many marketplaces are now required to collect and remit sales tax on your behalf as a "marketplace facilitator." That covers your marketplace sales — but not sales from your own website (for example, your Shopify store), which you're still responsible for.

How to Stay Compliant

• Track sales by state so you know when you're approaching a threshold.
• Register for a sales tax permit in states where you have nexus before you start collecting.
• Collect and remit on time, separating marketplace sales (often handled for you) from direct sales (yours to manage).
• Keep clean books that tie sales, collected tax, and remittances together.

The Bottom Line

Sales tax nexus is one of the easiest ways for a growing online business to fall out of compliance without realizing it. Tracking where you sell — and what's already being collected for you — is the foundation. Rules change and vary by state, so confirm your specific obligations.