Tax

5 Multi-State Sales Tax Mistakes E-commerce Owners Make

Wayfair turned every remote sale into a potential tax obligation. Here are the five sales tax mistakes that turn into back-tax exposure.

By Aparna Devalla, CPA3 min · 6 slidesUpdated June 15, 2026

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South Dakota v. Wayfair (2018) eliminated the physical-presence requirement. States can now require remote sellers to collect sales tax based purely on economic nexus.
Most states use $100K in sales OR 200 transactions as the threshold. California requires $500K (no transaction count). Texas $500K. New York $500K AND 100 transactions.
Marketplace facilitator laws shift collection to platforms (Amazon, Etsy, eBay, Shopify in some states) — but you may still need to register and file zero returns.
Penalties for non-compliance include back tax, interest, penalties, and in many states, personal liability for owners and officers.

SaaS is taxable in 20+ states and the list grows every year (NY, TX, WA, PA, MA, OH, CT, etc.).
Digital goods (downloadable software, ebooks, streaming media) are taxable in another set of states.
Even physical product sellers often have SaaS subscriptions (Shopify Plus add-ons sold through them, etc.) that may be taxable.
Fix: review what you actually sell against each state's taxability matrix annually. Avalara, TaxJar, and Anrok publish current state-by-state lists.

Amazon, Etsy, and eBay collect sales tax for you in most states under marketplace facilitator laws — but those sales count toward YOUR nexus thresholds in some states.
California, Texas, and several others include marketplace sales in your economic nexus calculation. Crossing the threshold via marketplace sales alone may require you to register, even if you make no direct sales.
Once registered, you must file returns — even 'zero returns' — or face minimum penalties for missed filings.
Fix: separately track marketplace vs direct sales by state. Use that data to determine where you have nexus.

A single remote employee in a state creates physical nexus there — both payroll tax AND sales tax exposure.
Inventory stored in Amazon FBA warehouses creates physical nexus in those states (currently 20+ FBA states).
Contractors regularly providing services in a state can create nexus.
Fix: maintain a 'nexus map' updated quarterly. Every hire in a new state, every FBA expansion, every trade show triggers a review.

Resale, wholesale, government, and nonprofit sales can be exempt — but only with a valid exemption certificate on file.
Without the certificate, the state assumes the sale was taxable and you owe the tax.
Audit consequence: even one missing certificate on a high-value account can mean tens of thousands in back tax.
Fix: collect exemption certificates at the start of each customer relationship. Re-validate annually for active accounts. Use a certificate management system at scale.

Most states have voluntary disclosure agreements (VDAs) that cap lookback periods to 3–4 years and waive penalties.
Without a VDA, the lookback can extend back to whenever you first established nexus — sometimes a decade.
VDAs typically require approaching the state proactively, before they identify you. Once you receive a notice, the VDA window often closes.
Fix: if you've discovered historical exposure, talk to a multi-state tax specialist BEFORE waiting for the notice. The math on VDA vs full lookback is usually a 5-to-1 in your favor.
Need a multi-state nexus review? Rubric Financial handles nexus analysis, registration, and voluntary disclosure programs.

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Need help applying this to your business?

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