Navigating Sales Tax Across States and Marketplaces
Sales tax compliance is one of the most complex—and important—areas of ecommerce, especially for multichannel and dropshipping businesses. With changing regulations, marketplace facilitator laws, and economic nexus thresholds, understanding how sales tax works across states and platforms like Amazon, Walmart, eBay, and Shopify is essential.
In this guide, we’ll simplify the sales tax landscape for ecommerce retailers and show how automation tools like EcomBiz.AI can reduce compliance risk.
🧾 What Is Sales Tax Nexus?
Sales tax nexus refers to the connection between a seller and a state that requires the seller to collect and remit sales tax.
There are two main types of nexus:
- Physical Nexus – You have a physical presence (office, warehouse, employees, etc.) in a state.
- Economic Nexus – You exceed a sales threshold in a state (e.g., $100,000 in revenue or 200 transactions annually), even with no physical presence.
Key Point: If you meet either threshold in a state, you’re required to register, collect, and remit sales tax.
🛍️ Marketplace Facilitator Laws: What They Mean
Most states have Marketplace Facilitator Laws. These laws require marketplaces like Amazon, Walmart, and eBay to collect and remit sales tax on behalf of third-party sellers.
✅ What Marketplaces Handle for You:
- Collecting sales tax for orders shipped to applicable states
- Filing and remitting tax to those states
- Issuing sales tax reports
❌ What You Still Need to Do:
- Track your nexus status across non-marketplace channels (like Shopify)
- Collect sales tax on your own website
- File for exempt sales and maintain documentation
🛒 Platform Breakdown: Sales Tax Responsibilities
| Platform | Handles Tax Collection? | Requires Seller Setup? |
|---|---|---|
| Amazon | ✅ Yes | ⚠️ For non-fulfilled items only |
| Walmart | ✅ Yes | ⚠️ May require setup per state |
| eBay | ✅ Yes | ❌ No setup needed |
| Shopify | ❌ No | ✅ Full responsibility |
Important: Even if a marketplace handles collection, you may still need to file a return showing $0 due in certain states.
🧮 How to Register for Sales Tax
If you meet nexus in a new state:
- Visit the state’s Department of Revenue site
- Apply for a sales tax permit
- Begin collecting and remitting sales tax
Tip: Always register before collecting tax—collecting without a permit is illegal in many states.
🔁 Filing Returns: What to Know
Each state has its own rules:
- Filing frequency: Monthly, quarterly, or annually
- Deadlines: Vary by state
- Marketplace reporting: You may need to subtract tax collected by marketplaces
Tools like TaxJar, Avalara, or your accounting team can help file returns accurately.
🔧 How EcomBiz.AI Helps
EcomBiz.AI simplifies multichannel tax tracking by:
- Monitoring order sources (Amazon, Walmart, Shopify, etc.)
- Labeling tax-collecting vs. non-tax-collecting orders
- Exporting sales data by state, channel, and SKU for your accountant
- Tagging nexus-relevant orders to alert you when thresholds are near
🧠 Common Mistakes to Avoid
- Assuming marketplaces cover all tax needs — They don’t for your direct store.
- Failing to track economic nexus — Many sellers exceed thresholds without knowing.
- Not separating marketplace vs. DTC tax in your reports.
- Not keeping exemption certificates for wholesale or tax-free sales.
✅ Final Thoughts
Sales tax compliance is a necessary part of scaling your ecommerce business. With multiple channels, varied state rules, and evolving laws, the smartest sellers automate as much of the tracking and reporting as possible.
Let EcomBiz.AI help you stay tax compliant while you focus on growing your business.
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