Sales Tax for E-Commerce: What Online Sellers Need to Know

Updated April 2026 · By the StoreCalcs Team

Sales tax compliance is one of the most confusing obligations for e-commerce sellers. After the 2018 South Dakota v. Wayfair Supreme Court decision, states can require online sellers to collect sales tax even without a physical presence. Most states have enacted economic nexus laws with thresholds based on sales revenue or transaction count. Failing to collect and remit required sales tax exposes you to back taxes, penalties, and interest. This guide explains the current rules, how to determine where you have nexus, and how to automate compliance.

Understanding Sales Tax Nexus

Nexus is the connection between your business and a state that triggers a sales tax collection obligation. Physical nexus exists where you have a physical presence: office, warehouse, employees, or inventory stored in Amazon FBA warehouses. Economic nexus exists where you exceed a state sales or transaction threshold, typically $100,000 in annual sales or 200 transactions in that state.

For Amazon FBA sellers, nexus is especially complex because Amazon stores your inventory in warehouses across multiple states. Having inventory in a state creates physical nexus in that state, regardless of whether you ever set foot there. This means an FBA seller may have nexus in 20+ states purely from inventory placement. Understanding where your inventory is stored is essential for determining your filing obligations.

State-by-State Economic Nexus Thresholds

Most states use a $100,000 sales threshold, a 200-transaction threshold, or both (triggered by whichever is reached first). Some states use only a dollar threshold with no transaction count. A few states have higher thresholds ($250,000-$500,000). Five states have no state sales tax at all: Alaska, Delaware, Montana, New Hampshire, and Oregon (though Alaska allows local sales taxes).

Thresholds are calculated on a rolling or calendar-year basis depending on the state. Once you exceed the threshold, the collection obligation typically begins the following month or quarter. Monitor your sales by state continuously — once you cross a threshold, the obligation is immediate and not collecting from that point forward creates a liability.

• Most common threshold: $100,000 in sales OR 200 transactions
• Some states: $100,000 in sales only (no transaction threshold)
• Higher thresholds: a few states at $250,000-$500,000
• No state sales tax: Alaska*, Delaware, Montana, New Hampshire, Oregon
• *Alaska allows local sales taxes in some jurisdictions

Registering and Collecting Sales Tax

Once you determine where you have nexus, register for a sales tax permit in each state before you begin collecting. Collecting sales tax without a permit is illegal in most states. Registration is free in most states and done through the state Department of Revenue website. After registration, you receive a filing frequency assignment (monthly, quarterly, or annually) based on your expected volume.

Configure your e-commerce platform to calculate and collect the correct sales tax rate for each order. Tax rates vary not just by state but by county, city, and special taxing district — there are over 13,000 distinct sales tax jurisdictions in the US. Manual calculation is impossible at scale. Use your platform built-in tax calculation (Shopify Tax, for example) or a dedicated service like TaxJar, Avalara, or Vertex.

Filing and Remitting Sales Tax

Each state has its own filing frequency, due dates, form, and process. Monthly filers typically file by the 20th of the following month. Quarterly filers file by the 20th of the month following the quarter end. Annual filers file by January 20th for the prior year. Late filing incurs penalties (5-25% of the tax due) and interest (6-12% annually) in most states.

File even if you collected zero tax in a period — most states require zero returns during active registration periods. Failure to file zero returns can result in estimated assessments (the state guesses what you owe) and license revocation. Automation services handle multi-state filing for $50-$200 per month, saving hours of manual work and reducing the risk of missed deadlines.

Common Sales Tax Mistakes

The most common mistake is ignoring the obligation entirely. Many small e-commerce sellers assume sales tax does not apply to online sales or that the amounts are too small to matter. States are increasingly auditing online sellers and issuing assessments with penalties and interest dating back to when the obligation began.

Other mistakes include collecting tax in states where you do not have nexus (creates a refund obligation to customers), using incorrect tax rates (location matters — ship-to address determines the rate, not ship-from), and failing to account for product taxability (some products are exempt in some states — clothing in Pennsylvania, food in most states, digital products in varying state rules). Get the basics right with automation and consult a sales tax professional for complex situations.