Selling Online in Multiple States Can Create Tax Questions

How selling across state lines can raise sales tax obligations, including the role of marketplace platforms.

A candle maker in Georgia sends a few orders to customers in Texas, then a few more to Ohio, and soon packages are leaving her studio for every corner of the country. Each of those sales feels like one happy transaction, and most owners never stop to ask whether it also created a filing obligation. Sales tax does not work the way most people picture it. It follows the buyer, and the rules that decide whether you must collect it belong to the state where the buyer lives, not the state where you work. That is why a growing online business can wake up one day with tax questions in places it has never visited.

Why a sale in another state can matter

For many years, a seller generally needed a physical presence in a state, such as an office, an employee, or a store, before that state could require it to collect sales tax. That changed with the 2018 Supreme Court decision in South Dakota v. Wayfair, which allows a state to require out of state sellers to collect and remit sales tax based on economic activity alone. Today the idea is called economic nexus, and it means your sales volume into a state can create an obligation even if you have never set foot there. Physical presence still counts too, so the two tests work side by side rather than one replacing the other.

How the thresholds work

Each state sets its own line, and you are measured state by state rather than on your national total. A common benchmark is $100,000 in sales into a state, though some states have also used a count of transactions, such as 200 orders. Several states have recently removed the transaction count, including Alaska, Utah, Illinois and Kentucky, which helps small sellers who ship many low priced items. Inventory stored in a state, including stock held in an Amazon fulfillment center, along with remote employees and contractors, can create physical nexus regardless of how much you sell there. A seller can therefore owe tax in one state because of a warehouse and in another because of sales volume at the same time.

Where marketplace platforms fit in

If you sell through a platform such as Amazon or Etsy, the platform is often treated as a marketplace facilitator, and many states require it to collect and remit the tax on your behalf. Florida is a helpful example. When a marketplace provider certifies that it will collect and remit the tax, the seller does not collect it on those sales. Florida also directs individual sellers to leave marketplace sales out when calculating their own threshold, so a seller who only sells through a marketplace would not cross it on those sales alone. Sales made on your own website are a different matter, because a seller remains responsible for collecting the tax when it has a physical presence in Florida or has crossed the $100,000 line on its own remote sales.

Not every state follows Florida's approach to counting. Some states exclude marketplace sales from the threshold calculation, while others include them because the economic activity still counts even though the platform collected the tax. A seller who splits sales between a marketplace and a personal storefront can land on different sides of the line in different states. This is one of the most common places I see owners caught off guard, because the marketplace dashboard looks tidy and the other channel gets forgotten.

What to do about it

Start by pulling your sales for the past year and sorting them by state and by channel, keeping marketplace sales separate from your own website sales. Compare those totals with each state's threshold, and note any state where you keep inventory or have a remote worker. Read your marketplace agreements to confirm the platform is collecting tax, and do not assume it from the checkout screen alone. Where you have crossed a line, register with that state, collect at the rate that applies at the buyer's address, and file on the schedule the state assigns. For most remote sales the rate is based on the buyer's ship to address, including any local taxes in that jurisdiction, so one state can involve several rates.

Waiting for a notice is the more expensive path, since unpaid tax, penalties, and interest can build for every month a filing is missed. A short review once or twice a year, and again after any strong sales season, usually keeps small surprises from becoming large ones. If you sell across state lines and are unsure where you stand, I would be glad to help you sort it out. You can reach my office through (561) 214-2561.