Why sales tax got harder after Wayfair
Before June 2018, you only had to collect sales tax in states where you had a physical presence. Then the Supreme Court decided South Dakota v. Wayfair, and the rules flipped overnight. States can now require you to collect sales tax based on economic activity alone, even if you have never set foot in the state.
For an ecommerce seller on Shopify, this is the single biggest compliance risk on the table. Cross a state's threshold without registering, and you become personally liable for the uncollected tax — not the customer. You pay it out of margin, plus penalties and interest, plus the cost of registering retroactively.
The four types of nexus you need to track
Nexus is the legal term for "enough connection to a state that the state can require you to collect tax." There are four ways to trigger it, and most multi-state sellers hit two or three without realizing.
The two that actually drive most ecommerce sales tax exposure are physical (especially FBA inventory) and economic. We'll focus on those.
State economic nexus thresholds for 2026
Most states have converged on $100,000 in annual sales as the trigger. A handful of large states use $500,000. The trend in 2025 and 2026 has been to remove transaction-count thresholds entirely — Alaska, Utah, and Illinois all dropped the "or 200 transactions" rule, leaving revenue as the only test. Here is how the major states break out:
Two details that trip people up. First, "sales" usually means gross sales — including exempt and non-taxable sales — in most states, so a B2B wholesaler with mostly resale-certificate transactions can still cross a threshold. Second, the measurement period varies: Florida looks at the previous calendar year, New York at the preceding four sales tax quarters, California within the calendar year with immediate trigger on the day you cross.
Marketplace facilitators vs. Shopify — the rule that matters most
Marketplace facilitator laws are the single biggest piece of good news for ecommerce sellers in the post-Wayfair world. If you sell on Amazon, Etsy, eBay, or Walmart Marketplace, the platform itself is required to collect and remit state sales tax on your behalf in most states. The marketplace handles registration, collection, and filing.
Shopify is a different story. Shopify is a software platform — not a marketplace. Shopify will calculate and collect tax on your behalf only if you have set up nexus, registered for permits, and configured the rates. The legal obligation sits squarely on you.
The rule that confuses most sellers: do marketplace sales count toward your own economic nexus threshold on your direct site? It depends on the state. Florida excludes marketplace sales — only your direct-to-consumer Shopify sales count. California, New York, and Washington include them. So a seller doing $400,000 on Amazon and $150,000 on Shopify into California has crossed the $500,000 threshold even though the Amazon piece was already taxed at the marketplace level. Always check each state's specific inclusion rule.
Worked example — David, multi-state Shopify seller
David runs a home goods brand on Shopify. He also sells the same products on Amazon FBA. His 2025 sales by state and channel:
Texas: $95,000 Shopify + $250,000 Amazon FBA
Florida: $115,000 Shopify + $80,000 Amazon FBA
New York: $90,000 Shopify (180 transactions) + $300,000 Amazon FBA
Pennsylvania: $130,000 Shopify + $40,000 Amazon FBA
Illinois: $110,000 Shopify + $60,000 Amazon FBA
Georgia: $40,000 Shopify (210 transactions) + $90,000 Amazon FBA
Ohio: $85,000 Shopify (450 transactions) + $50,000 Amazon FBA
Going state by state with 2026 rules:
- California ($500K, includes marketplace sales): $180K + $420K = $600K. Nexus crossed. Register and collect on Shopify sales. Amazon already handles marketplace sales.
- Texas ($500K, revenue only): $95K + $250K = $345K. Below threshold. Monitor monthly.
- Florida ($100K, excludes marketplace sales): Only the $115K Shopify counts. Threshold crossed. Register and collect on Shopify. (FBA inventory in a Florida warehouse would create immediate physical nexus regardless.)
- New York ($500K AND 100+ transactions, includes marketplace sales): $90K + $300K = $390K — below $500K. No economic nexus yet. Both thresholds must be met simultaneously.
- Pennsylvania ($100K, revenue only): $130K Shopify alone clears it. Register and collect.
- Illinois ($100K as of January 1, 2026): $110K Shopify clears it. Register and collect.
- Georgia ($100K OR 200 transactions): Shopify revenue is only $40K, but 210 transactions trips the count-based trigger. Register and collect.
- Ohio ($100K OR 200 transactions): $85K Shopify is below the dollar threshold, but 450 separate sales clear the 200-transaction trigger. Register and collect.
David has economic nexus and a registration obligation in six states for his Shopify channel: California, Florida, Pennsylvania, Illinois, Georgia, and Ohio. His Amazon sales in those same states are already covered by marketplace facilitator collection. If David's FBA inventory has been stored in any other state warehouses (Amazon redistributes inventory across the country), he likely has additional physical nexus exposure to investigate separately.
The compliance trap — personal liability for uncollected tax
If you had nexus and didn't register, the state does not chase your customers for the tax they didn't pay at checkout. The state chases you.
Lookback period: Depends on the state, and it is often longer when no return was ever filed. California, for example, can assess up to eight years back for an unregistered seller.
Penalties: Generally 10% to 30% of the uncollected tax, plus interest accruing from the original due date.
Personal exposure: Most states allow them to pierce the LLC veil for unpaid sales tax and pursue the responsible person individually.
Voluntary disclosure programs: Most states offer a voluntary disclosure agreement that limits the lookback to typically 3 to 4 years and waives some or all penalties — but only if you come forward before the state contacts you.
The voluntary disclosure path is almost always cheaper than waiting for an audit notice. Once a state's auditor opens a file on you, the VDA option is off the table.
How to figure out where you actually have nexus
The check is mechanical and you can run it once a quarter.
If you've already crossed thresholds without collecting
This is more common than people admit. A seller scales from $200K to $1.5M in two years, gets a notice from California in year three, and discovers back tax exposure in eight states. The path forward is almost always a voluntary disclosure agreement (VDA) in each state where you have unregistered exposure, before the state finds you. A qualified tax professional can help scope the exposure, prioritize the highest-risk states, and negotiate VDAs with limited lookback. Registering "going forward" while ignoring the historical period leaves the back liability hanging — and states do eventually find unregistered sellers.
Common mistakes
- Assuming Shopify handles sales tax automatically. Shopify will calculate and collect tax once you've configured it, but it will not register you, and it files and remits returns only if you turn on Shopify Tax automated filing, which is charged per return. The legal obligation is yours.
- Forgetting that FBA inventory creates physical nexus. Amazon redistributes your inventory across the country. Your FBA inventory may be sitting in 15+ state warehouses without your knowledge, and in many states each one is immediate physical nexus regardless of sales volume.
- Counting only direct sales when the state includes marketplace sales. California, New York, and Washington include your Amazon sales in your economic nexus calculation. Sellers who only count Shopify revenue miss the trigger.
- Ignoring transaction-count triggers. A few states still use the "$100K OR 200 transactions" rule. Low-ticket sellers — $20 phone cases, $15 jewelry — can hit 200 transactions on $5,000 in revenue.
- Registering without addressing back exposure. Registering "going forward" while ignoring the historical period you should have been collecting flags the gap to the state and exposes you to back tax assessment without VDA protections.
Frequently asked questions
The moment you cross a state's economic nexus threshold — typically $100,000 in sales, or in some states a $500,000 threshold or a transaction-count trigger. There is no minimum business size below which Wayfair doesn't apply.
Yes. Storing inventory in a state, including in an Amazon FBA fulfillment center, generally creates physical nexus immediately, with no revenue threshold. Amazon redistributes inventory across its warehouse network, so your stock may sit in many states simultaneously. Amazon collects tax on the marketplace sales themselves, but the physical-nexus obligation can still affect your direct sales into those same states.
Taxability of SaaS, downloadable software, and digital goods varies wildly by state. New York taxes prewritten software including SaaS. Texas taxes most digital products. California generally exempts SaaS. Florida exempts most digital products. Economic nexus thresholds typically still apply once you cross them, but whether the product is taxable in that state determines whether you actually charge tax. Check each state's specific rule.
Most states require registration within 30 to 90 days of crossing. Some states require collection to begin on the next transaction after you cross. New York requires registration within 30 days and collection to start 20 days after registering. Safest practice: register the same month you cross.
For the marketplace sales themselves, mostly yes — Etsy and eBay collect and remit on your behalf in nearly every state. But if you also sell direct (Shopify, your own site, in-person), those sales may trigger your own economic nexus separately. And in states like California and New York, your Etsy or eBay sales count toward your economic nexus calculation even though the marketplace handled the tax on those specific transactions.
Pursue a voluntary disclosure agreement (VDA) in each affected state before the state finds you. VDAs typically limit lookback to three or four years and waive some or all penalties. Once a state's auditor contacts you, the VDA option is gone and the lookback can extend much further. Worth bringing to a qualified tax professional immediately.
Stripe Tax, TaxJar, Avalara, and similar tools handle the calculation of the correct tax rate at checkout and produce filing-ready reports. They do not register you for sales tax permits — that is still your responsibility, though some offer paid registration services as add-ons. They also do not file returns automatically unless you subscribe to a managed-filing service. Calculation, registration, and filing are three separate steps.
This article provides general information about US tax topics and is not a substitute for personalized advice from a qualified tax professional. Tax law changes frequently — verify current rules with a tax professional before filing or making decisions based on this content.
