If you sell to customers in other states — through your own store, Amazon, Etsy or TikTok Shop — states can require you to register, collect and file there, even if you have never set foot in them. This article explains when that happens, and which mistakes you want to avoid.

Nexus: the connection that creates obligations

"Nexus" is the connection between your business and a state that lets the state impose tax duties on you. It comes in two flavors. Physical nexus is the classic one: an office, an employee, inventory in a warehouse. Economic nexus exists since the Supreme Court's 2018 Wayfair ruling: enough sales into a state creates the obligation on its own. Most states set the threshold around $100,000 in sales or 200 transactions per year — but the exact rules differ per state and keep changing.

Marketplace facilitator laws: partly solved, partly a trap

All states with a sales tax now require large marketplaces — Amazon, Etsy, Walmart, TikTok Shop — to collect and remit for the orders on their platform. Good news: those orders are largely handled for you. The trap: your own website sales are not covered, marketplace sales can still count toward your nexus thresholds in some states, and several states still expect you to register and file returns reporting the marketplace sales as exempt. The mix of marketplace and own-site sales is exactly where mistakes happen.

FBA inventory: nexus you didn't choose

Using FBA means Amazon spreads your inventory across warehouses in many states. Inventory is physical presence — and in a number of states that creates registration duties even when your sales into that state are small. If you sell through your own site as well, this matters double.

The mistakes we see most

  • Not watching the thresholds. A state's threshold is crossed mid-year, but the store keeps selling untaxed for months. Repairing that afterwards costs penalties and interest on top of the tax.
  • Assuming the marketplace handles everything. It handles its own orders — your Shopify sales remain fully your job.
  • Registering everywhere "to be safe". Registration creates filing duties, even at zero tax due. Register where you owe, not everywhere.
  • Books that cannot split revenue by state. Without state-level revenue data you cannot even determine where you crossed a threshold.
  • Ignoring old exposure. For back liability, a voluntary disclosure agreement (VDA) often limits the look-back period and waives penalties — but only if you come forward before the state finds you.

Practical: how to approach it

  1. Get your books to show revenue and transactions per state (we set this up as standard).
  2. Run a nexus study: where did you cross thresholds, and since when?
  3. Handle old exposure first — VDAs where they pay off, registrations where needed.
  4. Register prospectively in the states where you owe, and automate collection in your checkout.
  5. File on each state's schedule — monthly, quarterly or annually — and keep watching thresholds as you grow.

Thresholds and rules in this article describe the common pattern and change regularly — verify the current rules for your states, or let us do it as part of the nexus study.