Do I need to collect sales tax for my online store? Economic nexus and marketplace facilitators

Nexus is the connection that lets a state make you collect its sales tax. Before 2018, you needed a physical presence, such as an office, employee or inventory in the state.

In South Dakota v. Wayfair, Inc., 585 U.S. 162 (2018), the Supreme Court allowed states to require remote sellers to collect based on sales volume alone. That is economic nexus.

Every state with a sales tax now has an economic nexus rule for remote sellers. Most use $100,000 in sales. Some also use a transaction count, and the counting rules differ. You still have physical nexus where you keep inventory, including inventory stored in a fulfillment center.

Nexus for sales tax is separate from nexus for income tax. For the income tax side, see our guide to multi-state nexus for small businesses.

A marketplace facilitator is a platform that lists your products and processes the buyer’s payment. Amazon, Etsy, eBay and Walmart Marketplace are common examples. DC, Maryland and Virginia require facilitators to collect and remit sales tax on the sales they facilitate.

• Marketplace sales. The marketplace collects and remits. You do not collect again on those sales.
• Your own website or Shopify store. You collect and remit once you have nexus. Shopify is a storefront you run, not a marketplace facilitator. It can calculate tax, but the registration and filing are yours.
• Counting toward the threshold. Maryland and DC count your marketplace and direct sales together. Virginia counts only your direct sales when deciding whether you must register.

Example of the difference: a seller with 100 website sales and 150 Amazon sales into DC passes the DC threshold and must collect on the website sales. The same pattern in Virginia would not trigger registration, because only the 100 direct sales count there.

Selling on Amazon? See Amazon seller accounting.

TikTok Shop and Walmart Marketplace. TikTok’s US seller terms say TikTok calculates, collects and remits sales tax on sales to buyers in marketplace facilitator jurisdictions. Walmart’s tax collection and remittance policy addendum says Walmart.com is the marketplace facilitator for taxes covered by those laws. Walmart also says that for any taxes not covered by a facilitator law, it collects the tax and passes it to you to report and pay. Check your Walmart tax settings and reports for those amounts.

Drop shipping. In a drop-ship sale, you sell to the customer and your supplier ships the item directly. Your supplier may charge you sales tax unless you give it a resale or exemption certificate the supplier’s state accepts. Each state sets its own rules on which certificates it accepts from a seller that is not registered there. You still collect from your customer where you have nexus. See dropshipping taxes.

1. Track sales by state. Total your sales and order counts into each state for the current and prior calendar year. Split marketplace and direct sales.
2. Register before you collect. Register with the state agency once you cross a threshold. DC uses MyTax.DC.gov, Maryland uses Maryland Tax Connect, and Virginia uses its online business registration.
3. Collect the right rate. Maryland’s general rate is 6%. DC’s general rate is 6%, and OTR says it stays there through September 30, 2027. Virginia’s rate depends on where the buyer is: 6% in Northern Virginia, 5.3% in much of the state and higher in some regions.
4. Check what is taxable. Clothing, food, digital products and shipping charges are treated differently by state. Digital products and software have their own rules. See sales tax on SaaS and digital products.
5. File on schedule. The state assigns a monthly, quarterly or annual filing frequency. File even when you owe nothing, if the state requires it.
6. Reconcile to your books. Sales tax collected is a liability, not revenue. Your e-commerce bookkeeping should tie collected tax to what you filed.

If you passed a state’s threshold and never collected, the state can assess the tax you should have collected, plus interest and penalties. You usually cannot go back and charge your customers.

A voluntary disclosure agreement (VDA) lets you come forward before the state contacts you. Programs differ, but they generally limit how many years you must pay and can waive penalties if you pay the tax and interest.

• DC: OTR’s Voluntary Disclosure Program accepts anonymous requests. You are not eligible if OTR has already contacted you or you already file returns for that tax.
• Maryland: The Comptroller’s VDA program covers sales and use tax. You cannot apply if you are under audit.
• Virginia: Virginia Tax runs a voluntary disclosure program for businesses.

Do not register first and file late returns on your own. Registering can make you ineligible for a VDA in some states. Talk to a CPA first.

Best for: Shopify, Amazon, Etsy and multichannel sellers who are near or past a state threshold, or who are not sure where they owe sales tax.

1. Free initial consultation. Tell us your channels, where you ship and what you sell.
2. Fees quoted upfront, in writing. Transparent, fair fees in an engagement letter before work starts.
3. Nexus review. We total your sales and transactions by state from your platform reports and flag where you have nexus.
4. Plan. Register going forward, or use voluntary disclosure where you have past exposure.
5. Ongoing. We keep your books and sales tax liability in sync, and coordinate with your income tax returns.