E-commerce Sales Tax Nexus: What Every Seller Needs to Know Post-Wayfair

In 2018, the Supreme Court's ruling in South Dakota v. Wayfair changed everything for e-commerce sellers. Before Wayfair, you only had to collect sales tax in states where you had a physical presence, a warehouse, an office, an employee. After Wayfair, states can require you to collect and remit sales tax based purely on your sales volume there, regardless of where you're physically located.

Five years later, most e-commerce sellers still don't fully understand what this means for their business. Here's a clear breakdown.

What Is Economic Nexus?

Economic nexus means you have a sales tax obligation in a state once you exceed a certain threshold of sales or transactions there. The most common threshold, adopted by the majority of states, is $100,000 in annual sales or 200 separate transactions.

Once you cross that threshold in a state, you're typically required to register for a sales tax permit and begin collecting and remitting sales tax on sales to customers in that state.

Amazon Marketplace Facilitator Laws

Here's the good news for Amazon sellers: in most states, Amazon is classified as a Marketplace Facilitator. This means Amazon is legally responsible for collecting and remitting sales tax on your sales through their platform.

This covers all 50 states that have sales tax. For your Amazon FBA sales, you generally don't need to worry about sales tax collection and remittance, Amazon handles it.

The key exception: if you also sell directly (through Shopify, your own website, or other channels) to customers in states where you have nexus, you need to handle sales tax for those direct sales yourself.

Where Sellers Get Into Trouble

FBA inventory creates physical nexus. Storing inventory in Amazon's FBA warehouses creates physical nexus in those states, separate from economic nexus. Amazon distributes FBA inventory across their warehouse network, which means you may have physical nexus in states you've never heard of. Amazon publishes which states their fulfillment centers are in, check your inventory placement.

Shopify sales still require compliance. Amazon handling sales tax for Amazon sales doesn't mean you're covered for your Shopify store. If you sell directly to customers in states where you have economic nexus, you need to collect and remit separately.

Ignoring nexus until you're audited. States are actively auditing e-commerce sellers for back sales tax liability. Getting caught years behind can result in significant back taxes, interest, and penalties.

How to Get Compliant

The first step is a nexus analysis, determining which states you've crossed thresholds in. Pull your sales data by state for the past 12 months and compare against each state's thresholds.

For states where you have nexus, you need to register for a sales tax permit (usually through the state's revenue department website), configure your selling channels to collect the right rate, and file returns on the required schedule (monthly, quarterly, or annually depending on your volume in that state).

Tools like TaxJar and Avalara can automate a lot of this, they integrate with Shopify and other platforms to calculate the right rate at checkout and generate ready-to-file returns.

Voluntary Disclosure: If You're Behind

If you've been non-compliant and have back liability, most states have Voluntary Disclosure Agreements (VDAs) that let you come forward proactively, often with a limited lookback period and penalty waiver. It's almost always better than waiting to be audited.