The 2018 Supreme Court decision in South Dakota v. Wayfair changed US sales tax for every seller — including foreign sellers with no US physical presence. If your US sales cross certain economic thresholds in a given state, you have to register, collect, and remit sales tax in that state. Ignoring this obligation is increasingly dangerous as states cross-reference payment processors to find non-registered sellers.

The economic nexus concept

Before Wayfair, states could only require sales tax collection from sellers with physical presence — offices, employees, or warehouses in the state. Now states can require collection based purely on economic activity (sales volume or transaction count).

Typical state economic nexus thresholds:

  • $100,000 in state sales OR
  • 200 separate transactions in a calendar year

Cross either threshold in a state, and you have "economic nexus" triggering registration obligations. The specific thresholds vary by state — California is $500,000 with no transaction minimum; New York is $500,000 + 100 transactions; some smaller states have $100,000 thresholds.

Which states matter first

Most e-commerce sellers first cross thresholds in the largest states by consumer population:

  • California — largest US e-commerce market, $500k threshold
  • Texas — $500k threshold
  • New York — $500k + 100 transactions
  • Florida — $100k threshold
  • Illinois, Pennsylvania, Ohio, Georgia — typically $100k thresholds

Registering in all 45 states with sales tax is overkill for most sellers. Register where you actually have nexus.

Marketplace facilitator laws

A major change since 2019: most states now require marketplaces (Amazon, eBay, Etsy, Walmart Marketplace) to collect and remit sales tax on sellers' behalf. If you sell exclusively through marketplaces, your sales tax obligation may be fully handled by the platforms.

Key implication: marketplace sales don't always count toward your own registration thresholds. A seller doing $300k through Amazon exclusively may have no direct sales tax obligation because Amazon handles it at the marketplace level.

But: once you sell through your own Shopify store, own website, or any non-marketplace channel, the threshold calculation resumes at the individual seller level.

The mechanics of compliance

  1. Register for a sales tax permit in each state where you have nexus. Each state has its own registration portal. Cost: $0-50 per state, typically.
  2. Collect tax at checkout using a tax-calculation provider:
    • TaxJar (owned by Stripe) — mainstream choice, integrates with most e-commerce platforms. $19-99/month.
    • Avalara — enterprise-focused, more expensive, more comprehensive. $50+/month.
    • Stripe Tax — built into Stripe's platform, 0.4-0.5% of taxable transactions.
    • Platform built-in — Shopify Tax, BigCommerce native tax. Limited customization but adequate for basic setups.
  3. File sales tax returns monthly, quarterly, or annually depending on state and volume. Tax services can automate filings.
  4. Remit collected tax to each state by the required deadline.

Foreign seller reality

A common misconception: "I'm not in the US so US sales tax doesn't apply." That's incorrect. US state sales tax applies to sales into the state, regardless of the seller's physical location. A UK-based Shopify seller with $250,000 in California sales has California economic nexus and must register with the California Department of Tax and Fee Administration (CDTFA).

Practical implications:

  • You need a US tax-calculation service configured for your platform.
  • You may need a US CPA familiar with multi-state sales tax.
  • Some states require a local registered agent or responsible party for sales tax filings — this adds complexity for foreign sellers without US presence.

The risk of non-compliance

Ignoring sales tax obligations used to carry relatively low enforcement risk for foreign sellers. That's changed:

  • States cross-reference payment processors. California, New York, and other large states have agreements with Stripe, PayPal, and Shopify to identify sellers exceeding economic-nexus thresholds.
  • Back taxes + penalties + interest compound. Ignoring a $50k sales tax obligation for three years can grow to $75-100k with penalties and interest by the time a state discovers it.
  • Payment processors can freeze accounts. State tax authorities can, in some cases, compel payment processors to withhold funds from non-compliant sellers.
  • Resale inheritance. If you sell your business, unresolved sales tax obligations transfer to the buyer, reducing valuation or killing deals.

Voluntary disclosure agreements

States offer Voluntary Disclosure Agreements (VDAs) that let non-compliant sellers come forward and register with reduced penalties. If you've crossed thresholds and haven't registered, a VDA typically caps look-back liability at 3-4 years and waives some penalties. Better to initiate a VDA proactively than wait for state discovery.

The practical compliance workflow

  1. Track your sales by state. TaxJar, Avalara, and Stripe Tax all provide dashboards showing state-by-state revenue and where you're approaching or exceeding thresholds.
  2. Register proactively where you approach thresholds. Better to register one month early than one month late.
  3. Configure tax calculation at checkout. Once registered in a state, collect tax on all sales to that state.
  4. Delegate filing to a service. TaxJar AutoFile or Avalara Returns handle automatic filing. Without automation, staying on top of 10+ states' filings manually is a meaningful ongoing task.
  5. Reconcile annually. Verify collected-vs-remitted amounts match. Discrepancies trigger state audits.

FAQ

Does sales tax apply to SaaS?

It depends on the state. Some states tax SaaS as a taxable service (New York, Washington, Texas partially, Pennsylvania). Others don't (California generally, Florida). Research each state where you have nexus — SaaS tax treatment varies widely.

What about digital products (e-books, courses, software downloads)?

Similar: state-by-state variation. Digital products are taxable in about 30 states, not taxable in others. Tax services like TaxJar handle these distinctions automatically.

I only sell through Amazon. Do I need to register anywhere?

Depends on the state. In states with marketplace facilitator laws (most states now), Amazon handles collection and you may have no registration obligation. In a few holdout states, you may still need to register and file even for marketplace-only sales.

What if I'm a UK Ltd, not a US entity?

The seller's entity type doesn't change US sales tax obligations. What matters is your sales volume to each US state. Register in states where you cross thresholds regardless of your entity domicile.

Do I need US-based tax compliance help?

For more than 3-4 state registrations, yes. US multi-state sales tax is complex enough that software alone misses edge cases. A US sales tax specialist CPA for $1,500-5,000/year (depending on complexity) typically pays for itself in avoided errors.

Last verified April 2026. US sales tax rules change frequently; verify current thresholds and policies with each state.