Guide · Updated April 2026

Sales Tax for Online Sellers: Complete E-Commerce Guide (2026)

Navigate economic nexus, marketplace facilitator laws, and compliance for Shopify, Amazon, and Etsy sellers.

If you sell products online — whether through your own Shopify store, on Amazon, Etsy, eBay, or any other platform — you are almost certainly required to collect and remit sales tax in at least one US state. This guide breaks down everything you need to know about sales tax compliance as an e-commerce seller in 2026.

The Wayfair Decision: Why It Matters

Before 2018, online sellers only had to collect sales tax in states where they had a physical presence (called "physical nexus") — a warehouse, office, or employee. The landmark South Dakota v. Wayfair Supreme Court ruling changed everything.

The court ruled that states can require sales tax collection based on economic activity alone — meaning if you sell enough into a state, you have nexus there, even without any physical presence. This is called economic nexus.

Economic Nexus Thresholds

Each state sets its own threshold. The most common standard is:

$100,000 in sales OR 200 transactions
in the previous or current calendar year

However, some states differ significantly:

California: $500,000 sales threshold (no transaction count)
Texas: $500,000 sales threshold (no transaction count)
New York: $500,000 + 100 transactions (both required)
Kansas: No threshold — collects from the first dollar

Marketplace Facilitator Laws

If you sell through Amazon, Etsy, eBay, Walmart Marketplace, or Shopify's Shop app, you may already be covered. All 45 states with sales tax plus DC have enacted marketplace facilitator laws that shift the collection responsibility to the platform.

This means:

  • Amazon FBA sellers: Amazon collects and remits sales tax in all applicable states for marketplace sales.
  • Etsy sellers: Etsy handles collection and remittance in all states with marketplace facilitator laws.
  • Your own website (Shopify, WooCommerce): You are responsible for collecting and remitting sales tax yourself.

Step-by-Step Compliance Checklist

1.
Determine nexus: List every state where you have physical or economic nexus. Track sales by state monthly.
2.
Register for permits: Apply for a sales tax permit in each nexus state before you start collecting. Never collect without a permit.
3.
Configure your platform: Enable tax collection in your e-commerce platform. Use destination-based rates (ship-to address) in most states.
4.
Use accurate rates: Rates vary by zip code. Use our free calculator or API to get exact rates.
5.
File returns on time: Each state assigns a filing frequency (monthly, quarterly, or annually). File even if you had zero sales.
6.
Keep records: Maintain sales records by state for at least 4 years. Store exemption certificates for B2B sales.

Origin-Based vs. Destination-Based States

There are two systems for determining which rate to charge:

Destination-Based (majority)

Charge the rate at the buyer's shipping address. Used by most states including CA, NY, FL, and TX for remote sellers.

Origin-Based (fewer states)

Charge the rate at your business location. Used by AZ, IL, MO, OH, PA, TN, TX (in-state), UT, VA for in-state sellers.

Common Mistakes to Avoid

  • Collecting without registering — This is illegal in most states and can result in penalties.
  • Using flat rates instead of zip-code-level rates — Combined rates vary significantly even within the same city.
  • Ignoring small states — Even one sale into Kansas triggers nexus (no threshold).
  • Not filing zero returns — Failure to file (even with $0 tax) generates penalties and possible permit revocation.

Get the exact sales tax rate for any shipping address

Zip Code Calculator Developer API →

Frequently Asked Questions

Do I need to charge sales tax on online sales?

Yes, if you have nexus in a state you must collect and remit sales tax on sales to customers there. After Wayfair, most states require collection once you exceed $100,000 in sales or 200 transactions.

What is economic nexus for online sellers?

Economic nexus means you've exceeded a state's sales threshold even without physical presence. Once crossed, you must register, collect, and remit sales tax in that state.

Do marketplace facilitators like Amazon collect tax for me?

Yes. All 45 states with sales tax plus DC require platforms like Amazon, Etsy, and Walmart to collect and remit on behalf of third-party sellers for marketplace sales.

What is the Wayfair decision?

South Dakota v. Wayfair (2018) allowed states to require online sellers to collect sales tax without physical presence, overturning the previous Quill Corp v. North Dakota (1992) ruling.

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