What Every Ecommerce Seller Needs to Know About Sales Tax

When it comes to running an online store, sales tax is one of those topics nobody’s excited to talk about—until it becomes a problem. And trust me, when it becomes a problem, it’s not a small one.

If you’ve ever wondered “Do I really need to collect tax in that state?” or “What if my customers are in five different states?”, you’re not alone. Sales tax rules for ecommerce can feel like a maze—full of different rates, shifting laws, and tricky exceptions.

This guide on what every ecommerce seller needs to know about sales tax is here to clear the fog. We’ll break it down in plain language, walk you through the rules, and give you practical steps to stay compliant without losing your mind.

So, grab your coffee and let’s tackle this together—because the right sales tax strategy could save your business from costly surprises.

What Every Ecommerce Seller Needs to Know About Sales Tax—And Why It Matters Now

Sales tax isn’t just a box to tick for compliance—it directly affects your profit margins, your pricing strategy, and your ability to grow across states. If you ignore it, you’re not just risking penalties—you could be digging a hole that’s hard to climb out of. Let’s break down why it’s a bigger deal than most sellers realize.

The Anatomy of Sales Tax in Ecommerce

Sales tax is a consumption tax collected by sellers from customers and remitted to the state. In ecommerce, it’s triggered by the concept of nexus—a legal connection to a state. Nexus can be created by having physical presence (like a warehouse or office) or meeting economic thresholds (sales volume or transaction count).

It’s also about taxability—not every product is taxed the same way. Clothing, digital goods, and food can have different rules depending on the state.

The Wayfair Decision That Changed the Game

In 2018, the Supreme Court’s South Dakota v. Wayfair ruling shifted the playing field. Before this, states could only require sales tax collection if a seller had a physical presence there. Now, economic nexus is enough—meaning you might have tax obligations in states you’ve never set foot in.

This opened the door for states to create their own thresholds, making multi-state selling both more accessible and more complex.

The Real Cost of Ignoring Sales Tax

Skipping compliance isn’t just risky—it can be expensive. States can audit years of past sales, leaving you with penalties, interest, and back taxes. For some small sellers, that’s a business-ending hit.

There’s also the reputational damage—if customers find out you’re mishandling taxes, trust can erode fast. And in today’s competitive ecommerce landscape, trust is your currency.

Unpacking Nexus Rules: Where, When, And How Tax Obligations Kick In (2025–2026)

Once you understand why sales tax matters, the next step is figuring out where you actually owe it. That’s where nexus rules come into play. Nexus decides which states can require you to collect and remit sales tax—and in 2025–2026, these rules are evolving fast.

Economic Vs. Physical Nexus

There are two main ways you can trigger nexus. Physical nexus happens if you have a tangible presence in a state—like a warehouse, office, store, or even remote employees.

Economic nexus is purely about numbers. If your sales or transaction count in a state crosses a certain threshold—often $100,000 in sales or 200 transactions—you’re on the hook, even if you’ve never set foot there.

2025 Threshold Changes You Can’t Ignore

Several states are tweaking their thresholds in 2025. For example, some are removing the transaction count rule and sticking only to sales revenue limits. Others are lowering their thresholds to capture smaller sellers.

Alaska, historically sales-tax-free, has also introduced local sales tax collection in certain jurisdictions—something sellers need to keep on their radar.

Why This Gets Tricky For Multi-State Sellers

If you sell nationwide, you might hit nexus in multiple states at different times. That means tracking sales data per state is crucial. Without this, you could either over-collect and frustrate customers or under-collect and owe back taxes later.

Step-By-Step Compliance Checklist: From Permit To Filing Without Headaches

Once you know where you have nexus, the real work begins—getting compliant. The process can feel overwhelming, but breaking it into clear, manageable steps makes it far less intimidating. Here’s how to move from uncertainty to a smooth sales tax routine.

Step 1 – Identify Your Nexus States

Start by mapping out every state where you meet physical or economic nexus requirements. Use your sales data and transaction counts for the past 12 months. Don’t forget marketplace activity—selling through Amazon or Etsy can create nexus through stored inventory.

Step 2 – Register For Sales Tax Permits

Before collecting a single cent in sales tax, you need a valid permit in each nexus state. Applying without a permit can lead to fines, and collecting without one is illegal in most states. Applications are usually handled through the state’s Department of Revenue website.

Step 3 – Configure Your Sales Tax Collection

Once you have your permits, set up your ecommerce platform or marketplace to collect tax. Most platforms let you automate this based on state rates and product categories. Make sure you correctly classify products—some states tax clothing differently from electronics.

Step 4 – Track And Record Transactions

Keep detailed records of all sales and the tax collected. This isn’t just for filing—it’s your safety net if you’re ever audited. Cloud-based spreadsheets or accounting software can make this effortless.

Step 5 – File And Remit On Schedule

Each state has its own filing frequency—monthly, quarterly, or annually—based on your sales volume. Missing deadlines can mean late fees and interest, so set reminders or use tax automation software to stay on track.

Top 2025–2026 Sales Tax Changes Every Ecommerce Seller Must Monitor

Sales tax rules don’t stand still. States update rates, thresholds, and exemptions every year—and sometimes mid-year. Staying informed is the only way to avoid nasty surprises when you file. Here are the key changes already shaping 2025–2026.

New Nexus Threshold Adjustments

Some states are moving away from the “200 transactions” rule and focusing solely on sales revenue. This is good news for sellers with many small orders, but it also means lower revenue thresholds in certain states could bring you into compliance sooner than expected.

Expanding Digital Goods Taxation

More states are now taxing digital goods—things like e-books, downloadable templates, and online courses. A few states are even reclassifying streaming subscriptions as taxable services. If your store sells digital products, these changes could directly impact your pricing and margins.

Marketplace Facilitator Rule Updates

Marketplace facilitator laws—which require platforms like Amazon, Etsy, and Walmart to collect tax on behalf of sellers—are evolving. In some states, marketplaces now cover fewer product types, leaving sellers to collect on certain transactions themselves. Understanding these exceptions is critical to staying compliant.

Best Tools & Software For Simplifying Multi-State Sales Tax

Manually tracking rates, deadlines, and nexus triggers across multiple states is a recipe for mistakes. The right tools can automate most of the heavy lifting, freeing you to focus on running your store. Let’s look at what to consider and some of the top options.

What To Look For In A Sales Tax Tool

Your software should handle rate calculation, track nexus thresholds, automate filings, and store exemption certificates. Multi-channel integration is key—if you sell on Shopify, Amazon, and Etsy, you need a tool that syncs them all. Cloud-based platforms also let you access your data anytime, anywhere.

Popular Solutions For Ecommerce Sellers

• TaxJar – Strong for automation and multi-state filing.
• Avalara – Robust enterprise features with marketplace integration.
• Numeral – Great for analytics and tracking compliance health.
• Webgility – Useful for integrating accounting and tax reporting.

Each has pros and cons—choose based on your sales volume, budget, and the complexity of your operations.

DIY Options If You’re Just Starting

If you’re small-scale, you can track sales tax manually with spreadsheets and set reminders for filing deadlines. It’s more work, but it can save costs until your sales justify automation.

Platform-Specific Sales Tax Rules: Amazon, Shopify, Etsy & Beyond

Every ecommerce platform has its own quirks when it comes to sales tax. Some handle most of the process for you, while others leave the responsibility in your hands. Knowing the differences can prevent costly oversights.

Amazon FBA And Inventory Nexus

If you use Amazon FBA, your products might be stored in warehouses across multiple states. That physical presence can create nexus in each of those states—even if you never directly ship there yourself. Amazon collects tax in many states under marketplace facilitator laws, but you still need to monitor which transactions they don’t cover.

Shopify’s Built-In Sales Tax Features

Shopify lets you configure tax collection by region and product type. It’s convenient, but it’s not set-and-forget. You still need to confirm rates, apply exemptions correctly, and ensure that tax settings match your nexus states. For complex setups, third-party tax apps can fill the gaps.

Etsy And Other Marketplaces

Etsy, Walmart Marketplace, and similar platforms typically collect and remit tax on your behalf for most states. But if you sell certain non-covered products or ship internationally, you might still need to handle tax collection yourself. Always review the platform’s tax policy—don’t assume it’s all covered.

Avoid Common Ecommerce Sales Tax Pitfalls (And What To Do Instead)

Even seasoned sellers can trip over sales tax rules. These mistakes don’t just cause compliance headaches—they can cost you money, customer trust, and valuable time. Here’s what to watch out for and how to stay clear.

Ignoring Low-Volume States Until It’s Too Late

Many sellers assume small sales in a state don’t matter. But if you cross a threshold mid-year and don’t notice, you could owe back taxes for months of uncollected sales. Keep a monthly nexus report so you catch changes early.

Misclassifying Products

Not all items are taxed equally. For example, clothing might be fully taxable in one state but exempt in another. Misclassifying products can lead to overcharging customers or underpaying states—both of which create problems.

Over-Relying On Marketplace Auto-Collection

Marketplaces handle a lot, but they’re not perfect. There may be exemptions, specific product categories, or states they don’t cover. Always confirm what’s collected on your behalf and where you still have obligations.

Failing To Maintain Audit Trails

If a state audits you, they’ll want proof of every sale and tax collected. Without organized records, even an honest mistake can turn into a costly fine. Use cloud-based tools to keep everything accessible and secure.

Audit-Proof Your Store: Documentation, Exemptions, And Record-Keeping Made Easy

An audit might sound intimidating, but if you’re organized, it’s just another business process. The key is to have your sales tax records ready, accurate, and accessible—so you can respond quickly without scrambling.

Keep Exemption Certificates On File

If you sell to tax-exempt customers, like wholesalers or nonprofits, you must keep their exemption certificates. Without them, states can hold you liable for the tax, even if the buyer was legally exempt. Store these digitally with clear labeling by customer name and date.

Retain Records For The Long Haul

Most states require you to keep records for at least three to four years. That includes invoices, receipts, and tax reports. Cloud storage platforms make it easy to organize files by year and state, ensuring nothing gets lost.

Track Filings And Payments

Create a simple system to log every filing and payment confirmation. This way, if a state questions a payment, you have proof ready to go. Many tax software tools include dashboards that track these automatically.

Conclusion & Next Steps

Sales tax might not be the most exciting part of running an ecommerce business, but ignoring it can turn into one of the most expensive mistakes you’ll ever make. The good news? Once you understand your nexus, get your systems in place, and stay on top of state changes, it becomes a manageable part of your routine.

Now’s the time to review your sales data, identify where you have obligations, and set up a process—whether that’s automation software, a reliable accountant, or a DIY tracking system. The earlier you take control, the less chance there is for unpleasant surprises.

Sales tax laws will keep evolving, but with the right preparation, you won’t be caught off guard. Start small, stay consistent, and treat compliance as part of your business growth strategy—not just a box to check. Your future self will thank you.