Does FBA inventory create nexus? Amazon sellers and state income tax

Nexus is the connection that lets a state tax you. It is tested separately for each tax.

• Sales tax. Since South Dakota v. Wayfair (2018), states can require collection based on sales volume alone. Inventory in a state is also physical presence. But for your Amazon orders, Amazon is the marketplace facilitator and collects and remits the tax. Your own-site and Shopify sales are a separate question. See e-commerce sales tax and economic nexus.
• Income and franchise tax. Marketplace facilitator laws do not touch these taxes. If your FBA inventory gives a state nexus, you may owe a corporate income, franchise or gross receipts tax there, or have pass-through and personal filings. Amazon files none of these for you. See multi-state nexus for small businesses.

Many sellers learn this from a state letter years after their inventory first landed in that state.

Public Law 86-272 (15 U.S.C. § 381) bars a state from imposing a net income tax on a seller whose only activity in the state is soliciting orders for tangible goods, where orders are approved and filled by shipment from outside the state.

FBA inventory is shipped from inside the state. The Multistate Tax Commission’s Statement of Information on P.L. 86-272 lists keeping a stock of goods in the state, other than samples, as an activity that is not protected. Many states follow that statement.

P.L. 86-272 also covers only net income taxes. It does not apply to sales tax, and it may not apply to franchise or gross receipts taxes that are not measured by net income.

States do not agree on whether inventory Amazon places in a state, without the seller choosing the location, is enough for nexus.

In Online Merchants Guild v. Hassell, No. 179 M.D. 2021 (Pa. Commw. Ct. Sept. 9, 2022), the court held that Pennsylvania failed to show sufficient contacts to make out-of-state FBA merchants, whose only connection was Amazon storing their goods in a Pennsylvania warehouse, collect sales tax or pay personal income tax. The ruling addressed Pennsylvania sales tax and personal income tax. It did not decide other states’ rules.

As of October 2026, there is no single national answer. Each state’s statutes, guidance and audit practice control. Treat any blanket “FBA never creates nexus” or “FBA always creates nexus” claim with caution.

1. Map inventory by state and year. Use Seller Central’s inventory reports to see which fulfillment centers held your goods and when.
2. Test each state. Check nexus rules and thresholds for every tax type, not only sales tax.
3. Estimate exposure. Approximate the tax, interest and penalties by state and year.
4. Choose a path. File going forward, or use a voluntary disclosure agreement (VDA) for past years.

The Multistate Tax Commission’s Multistate Voluntary Disclosure Program covers sales and use tax and income and franchise tax in participating states. The taxpayer files and pays for a lookback period in exchange for a penalty waiver, and interest is generally still owed. The MTC keeps your identity confidential until you sign with a state. Prior contact with a state about a tax type disqualifies you for that tax, so act before a letter arrives. Many states also run their own VDA programs.

Best for: Amazon FBA and multichannel sellers with inventory in several states, sellers who received a state nexus letter or questionnaire, and sellers preparing for a sale or funding.

1. Free initial consultation. Tell us your entity type, home state and sales channels.
2. Fees quoted upfront, in writing. Transparent, fair fees in an engagement letter before work starts.
3. Nexus study. We map inventory and sales by state and year and test each tax type.
4. Plan. Register and file going forward, or pursue voluntary disclosure where there is past exposure.
5. Ongoing. We keep state filings in step with your Amazon seller accounting and federal return.