Selling online means navigating sales tax rules that differ in nearly every state. Below are clear answers to the Frequently Asked Questions (FAQs) ecommerce and CPG brands ask most, from nexus to registration to back taxes.
Do I Need To Collect Sales Tax?
Yes. Most tangible products sold online are taxable, but the rules vary by state; you only need to collect sales tax in states where you have nexus.Taxability gets more complicated beyond physical goods. Services, SaaS, apparel, and digital goods may be taxed differently depending on the jurisdiction. Selling through marketplaces adds another layer, because it affects who is responsible for collecting and remitting the tax.TaxHero’s full-service solution automatically handles taxability determinations, so you never have to guess.What Is Nexus and Why Does It Matter?
Nexus is the connection between a seller and a state that triggers a sales tax obligation. If you have nexus in a state, you are legally required to register, collect, and remit sales tax in that state.Understanding nexus is the first step toward staying compliant and avoiding costly penalties. There are two main types.What Creates Physical Nexus?
Having a tangible presence in a state creates physical nexus.Common triggers include:- Offices
- Warehouses
- Employees
- Certain activities at trade shows
- Third-party fulfillment locations
What Creates Economic Nexus
Economic nexus is based on your sales volume or transaction count in a state. The Supreme Court’s 2018 South Dakota v. Wayfair ruling established that states can require out-of-state sellers to collect sales tax once they exceed a sales threshold.Economic nexus thresholds vary by state. Many states use a $100,000 sales threshold, while others set different thresholds or impose additional transaction requirements. Several states have also eliminated their transaction-count thresholds. Check each state’s current rules, including which sales count toward the threshold and the measurement period. Ongoing monitoring helps growing ecommerce brands identify potential registration obligations.How Do I Know Where I Have Nexus?
Map your sales data against each state’s economic nexus thresholds, and review your physical footprint (inventory, staff, locations) alongside it.Manual tracking is error-prone and time-consuming, especially if you sell in many states. TaxHero’s nexus monitoring service continuously tracks your exposure and alerts you before you cross a threshold, so you can act in time. Because real sales tax accountants review your situation, you get expert judgment and not just a spreadsheet flag.Does Selling on a Marketplace Affect My Nexus?
Yes, but not in the way many sellers assume.Marketplace facilitator laws generally require qualifying platforms like Amazon and Walmart Marketplace to collect and remit sales tax on taxable marketplace sales where the laws apply.However, sellers may still have registration, reporting, and recordkeeping obligations. Sales through their own websites and other channels can create separate collection responsibilities.Does storing inventory in an Amazon fulfillment center create sales tax nexus?
Yes. Inventory stored in a state through Amazon’s Fulfillment by Amazon (FBA) program can create physical nexus, even when Amazon collects sales tax on marketplace transactions. Sellers may still need to register, file returns, or meet other state reporting requirements.How Do I Register To Collect Sales Tax?
Register with each state’s department of revenue where you have nexus before you begin collecting. The process looks like this:- Identify the states where you have nexus.
- Gather your business information (entity details, EIN, ownership information, and so on).
- Register with each state’s department of revenue.
How Often Do I Need To File Sales Tax Returns?
Sales tax filing frequency varies by state. Depending on the jurisdiction, businesses may need to file monthly, quarterly, or annually. States may assign filing schedules based on tax liability, sales volume, or other applicable criteria. Requirements and deadlines differ across the 45 states with a general statewide sales tax, Washington, D.C., and hundreds of independent, home-rule local jurisdictions.Alaska doesn’t impose a statewide sales tax, but its local municipalities do. Filing returns through the local government or the ARSSTC (Alaska Remote Sellers Sales Tax Commission) is another factor businesses selling into that state shouldn’t overlook.What If I Have Unpaid Sales Tax From Past Years?
If you have unpaid sales tax, the total amount owed typically varies based on the specific state laws, the outstanding tax balance, and how long the liability remained unaddressed. This commonly happens to many ecommerce brands that discover unexpected nexus obligations as they scale.Voluntary disclosure agreements (VDAs) may help an eligible business resolve past sales tax exposure. Depending on the state and the agreement, benefits may include reduced or waived penalties and a limited lookback period. Eligibility rules vary, and businesses that have already been contacted by a tax authority may not qualify.TaxHero has also helped businesses address historical sales tax exposure. Read how one brand resolved a sales tax audit involving nearly $53,900 in liability.How TaxHero Makes Sales Tax Compliance Simple
Managing sales tax across multiple states can become increasingly complex as your ecommerce business grows. From identifying nexus and registering in new jurisdictions to filing returns and remitting payments, each responsibility requires ongoing attention.TaxHero brings these compliance tasks together in a single managed service, combining nexus monitoring, registration, automated filing, payment support, and audit assistance under an all-inclusive pricing package. Real sales tax accountants support your compliance decisions, giving your team a clearer view of its obligations without having to manage every process manually.Ready to simplify sales tax compliance? Book a consultation now to discuss your business, understand your potential compliance gaps, and explore how a managed solution can support your growth.
