If you sell online, you owe ecommerce sales tax in every state where your business has established a legal connection, called nexus, to that state. That connection can come from a physical footprint (inventory, an employee, a warehouse) or purely from sales volume into the state. Once nexus exists, you need to register for a permit, charge the correct rate on each order, file returns on the schedule the state assigns, and remit what you collected. Forty-five states and the District of Columbia impose a sales tax, and a seller shipping nationwide can end up with duties in dozens of jurisdictions at once.
What Creates a Collection Duty in a State
A state cannot force you to collect its sales tax until your business has nexus there. Two forms matter for most online sellers.
Physical Presence
The oldest trigger is having something of yours in the state. Inventory sitting in a third-party fulfillment warehouse counts. A remote employee working from their home counts. Even attending a trade show can count. This kind of nexus exists no matter how little you sell into the state, and sellers using national fulfillment networks routinely establish it in places they’ve never visited because their goods are stored there.
Economic Nexus
In South Dakota v. Wayfair, Inc. (2018), the Supreme Court upheld a South Dakota law requiring out-of-state sellers to collect once they exceed $100,000 in sales or 200 transactions into the state in a calendar year.1Legal Information Institute. South Dakota v. Wayfair, Inc. Every state with a sales tax has since adopted its own economic nexus rule, and $100,000 has become the most common revenue threshold.
The transaction-count prong is fading. More than a dozen states have dropped the 200-transaction test entirely as of mid-2025, keeping only the dollar threshold; Illinois followed in January 2026. That shift matters for low-price, high-volume sellers who used to trip nexus on transaction count alone. A handful of states set the dollar figure above or below $100,000, and a few require you to exceed both prongs rather than either one. Check each state’s current rule before assuming the South Dakota model applies.
Older nexus theories tied to marketing relationships (click-through nexus for referral partners, affiliate nexus for corporate ties) still exist on the books in many states, but economic nexus will almost always be what binds an online seller first.
When the Marketplace Collects for You
If your sales flow through Amazon, Etsy, eBay, Walmart, or a similar platform, the platform is almost certainly handling sales tax on your behalf. Marketplace facilitator laws now exist in virtually every state with a sales tax, and they shift the collection and remittance duty onto the platform that processes payments and facilitates delivery.2Streamlined Sales Tax Governing Board. Marketplace Facilitator
This is the single biggest simplification for small sellers. If 100% of your revenue moves through a covered marketplace, the platform calculates, collects, and remits in every state where it has an obligation, and you generally don’t register separately for those sales.
The complication arrives the moment you also sell through your own website or a channel the facilitator laws don’t cover. Those direct sales are yours to track, and they count toward economic nexus on their own. Some states also require sellers to file informational returns reconciling marketplace sales with direct sales even when the platform handled the tax. Keep records that clearly separate the two revenue streams; that separation is what an auditor will ask for.
Charging the Right Rate
Once you know you owe tax in a state, the next question is which rate applies. That depends on the state’s sourcing rule.
Destination-Based Sourcing
Most states use destination-based sourcing. You charge the combined state, county, and municipal rate at your customer’s shipping address, not your warehouse location. A single state can have hundreds of distinct local rates, which is why most ecommerce sellers eventually adopt tax automation software rather than maintaining rate tables by hand.
Origin-Based Sourcing
About a dozen states use origin-based sourcing for at least some transactions, meaning you charge your business’s local rate on shipments within that same state. Origin sourcing generally applies only to intrastate sales; shipments crossing state lines follow the destination state’s rules.
Digital Goods Are Their Own Problem
Sourcing gets murkier for software subscriptions, downloads, streaming, and cloud services. A growing number of states tax these, but the definitions vary widely. One state may tax downloaded software but exempt browser-based access. Another may tax streaming music but exempt e-books. Most states default to destination sourcing based on the buyer’s billing address or IP location, but if you sell digital products, verify each state’s rule rather than generalizing.
Registering Before You Collect
You need a valid sales tax permit in every state where you have nexus before you start collecting. Collecting without one is illegal in most states, and so is failing to collect once you should be.
Registration typically asks for your EIN, legal business name, product types, and personal information for owners or officers. Based on your expected volume, the state assigns a filing frequency (monthly, quarterly, or annually). Most states register you through an online portal on the revenue department’s site, and many issue permits for free, though a few require a refundable security deposit.
Timing rules vary. Some states expect registration within 30 days of crossing the economic nexus threshold; others give you until the next quarter or the following January. Falling behind on registration does not pause the tax liability. The state considers you responsible from the moment you crossed the threshold, whether the permit was in hand or not.
One Application for Multiple States
If you owe tax in several states at once, the Streamlined Sales Tax Registration System lets you register in all 24 member states through one online application.3Streamlined Sales Tax Governing Board. Sales Tax Registration SSTRS You still file and pay each state separately, but the registration step is consolidated, and the system connects sellers with Certified Service Providers that handle calculation and filing in member states. Non-member states still require direct registration.
Handling Exempt Sales
Not every order is taxable. When a buyer purchases goods for resale rather than personal use, the transaction is typically exempt. The buyer gives you a resale certificate, you keep it on file, and the eventual retail customer pays tax down the line.
The seller’s exposure here is unforgiving. If an auditor asks for the certificate and you can’t produce a complete, valid one, you owe the tax yourself. It does not matter that the buyer told you the goods were for resale. No certificate, no exemption. Most states expect certificates to be refreshed at least every three years, and it’s your job to check that each one is filled out properly. Sloppy certificate files are one of the most common audit triggers for ecommerce businesses, and back taxes accumulate quickly on high-volume wholesale accounts.
Other exemptions apply to categories like certain foods, clothing (in some states), and sales to nonprofits or government buyers. Each state draws its own lines, so an item that’s exempt in one state can be taxable next door.
Filing Returns and Paying
You file a return every period the state assigns, even if you had zero sales. Skipping a zero return counts as a failure to file and generates penalties in most states. Filings are electronic in most jurisdictions, submitted through the revenue department’s portal, and you report gross sales, exempt sales, and taxable sales for the period. Payment is usually by ACH debit from your business bank account; some states accept credit cards with processing fees.
Filing frequency can move. A state that started you on quarterly filings may bump you to monthly after a period of strong growth, so watch for notices from revenue departments.
Vendor Discounts for Filing on Time
Close to 30 states reward on-time filers with a vendor discount that lets you keep a small share of the tax you collected. Discounts typically fall between 0.25% and 5% of the tax due, with most states capping the dollar amount per period. The discount vanishes if you file even one day late. Across multiple states, these amounts add up over a year.
Five States Without a Statewide Sales Tax
Alaska, Delaware, Montana, New Hampshire, and Oregon impose no statewide sales tax, so shipments to customers in those states carry no state-level collection duty. Alaska is a partial exception: many of its local jurisdictions levy their own sales taxes, and the Alaska Remote Seller Sales Tax Commission enforces economic nexus rules for participating localities. Delaware, Montana, New Hampshire, and Oregon have no local sales taxes either.
Falling Behind: Liability, Penalties, and Coming Forward
Sales tax you collect from customers is not your money. States treat it as a trust fund held for the government, and that framing has real consequences.
Personal Liability
If a business collects sales tax and spends it on rent, inventory, or payroll instead of remitting it, the individuals who control the finances can be held personally liable for the unpaid amount. Liability typically reaches anyone with authority over financial decisions (officers, directors, managers who sign checks or direct payments). The standard in most states is willfulness, meaning you knew the tax was due and chose to pay someone else first. Bad intent isn’t required. Liability is joint and several, so the state can pursue the full balance from any responsible individual, not just the entity.
Penalties and Interest
Late filing penalties usually start around 5% of the unpaid tax for the first month and grow with each additional month, often capping between 25% and 30% of the tax. Many states impose a minimum penalty (commonly $50) even when little or no tax was due, so a late zero return still costs something. Interest runs from the original due date on top of penalties. Willful failure to collect or remit can push penalties as high as 50% to 100% of the tax due.
The most expensive situation is the seller who never registered at all. Without a filed return, most states have no statute of limitations on assessment, so an auditor can theoretically reach back to your first sale into the state.
Voluntary Disclosure Agreements
If you’ve been selling into states where you had nexus but never registered, most states offer Voluntary Disclosure Agreements that let you come forward, register, and settle the past liability under negotiated terms. The main benefit is penalty relief: states participating in the Multistate Tax Commission’s Voluntary Disclosure Program waive non-reporting penalties for the covered period in exchange for the seller filing returns and paying back taxes plus interest.4Multistate Tax Commission. Multistate Voluntary Disclosure Program The lookback period, meaning how far back the state requires you to file and pay, is typically three to four years, with a few states reaching five.5Multistate Tax Commission. Lookback Periods for States Participating in National Nexus Program
Eligibility requires that the state hasn’t already contacted you about the liability. Once you’ve received an audit notice or a nexus questionnaire, the VDA window has closed for that state. The MTC program handles multiple states through a single application, which is far more workable than approaching each state on its own when you discover you should have been collecting in a dozen places.