If you sell products online in the United States, sales tax is one of the most complicated — and most dangerous — compliance obligations you face. The rules changed dramatically after the 2018 South Dakota v. Wayfair Supreme Court decision, and most e-commerce sellers are still catching up.
This guide breaks down what you need to know in 2026: economic nexus, physical nexus, marketplace facilitator laws, and what to do if you're already behind.
The basics: what is sales tax nexus?
Nexus is the legal connection between your business and a state that gives that state the right to require you to collect and remit sales tax. There are two types that matter for e-commerce sellers:
Physical nexus
You have physical nexus in a state if you have a tangible presence there — an office, a warehouse, employees, or inventory. For Amazon FBA sellers, this is critical: Amazon distributes your inventory across its fulfilment network without your input. If your products sit in an Amazon warehouse in Texas, you have physical nexus in Texas — even if you've never been to Texas.
Economic nexus
After the Wayfair decision, most states can now require you to collect sales tax once you exceed a certain threshold of sales or transactions in that state — even without any physical presence. The most common threshold is $100,000 in sales or 200 transactions in a calendar year, though some states have different numbers.
Key point: You can trigger nexus in a state through either physical or economic presence. You don't need both. For most FBA sellers, you'll have physical nexus in 10–20 states through Amazon's warehouse network alone.
State-by-state thresholds (2026)
Here are the economic nexus thresholds for the largest e-commerce states. Note that 5 states — Alaska, Delaware, Montana, New Hampshire, and Oregon — have no state-level sales tax.
| State | Economic Nexus Threshold | Notes |
|---|---|---|
| California | $500,000 in sales | Highest threshold. No transaction count. |
| Texas | $500,000 in sales | Major FBA warehouse state. |
| New York | $500,000 in sales + 100 transactions | Must meet both. |
| Florida | $100,000 in sales | Standard threshold. |
| Pennsylvania | $100,000 in sales | Major FBA warehouse state. |
| Illinois | $100,000 in sales OR 200 transactions | Either trigger applies. |
| Ohio | $100,000 in sales OR 200 transactions | Standard. |
| Georgia | $100,000 in sales OR 200 transactions | Standard. |
| Washington | $100,000 in sales | B&O tax also applies. |
| Arizona | $100,000 in sales | TPT (transaction privilege tax). |
Marketplace facilitator laws
Here's one piece of genuinely good news: as of 2026, every state with a sales tax has a marketplace facilitator law. This means that when you sell through Amazon, Shopify's Shop channel, Walmart, or eBay, the marketplace collects and remits sales tax on your behalf for orders placed through their platform.
However, this does not mean you're off the hook. You still need to:
- Register in every state where you have nexus — even if Amazon is collecting for you
- File returns in those states — even if the return shows $0 for marketplace sales
- Collect and remit on your own website sales (Shopify, WooCommerce, etc.) — the marketplace facilitator law doesn't cover your direct channels
Common mistake: Many sellers think "Amazon handles my sales tax" and do nothing. Amazon handles collection and remittance for marketplace sales, but you're still responsible for registration, filing, and your direct channel sales. If you're not registered in a state where you have nexus, you're accumulating liability.
What happens if you're behind
If you've been selling for years without proper sales tax compliance, you have accumulated past-due liability in every state where you had nexus but weren't collecting. This includes the tax that should have been collected from customers, plus interest and penalties.
The good news: most states offer a Voluntary Disclosure Agreement (VDA) program. Here's what that means:
- Limited lookback period: States typically only go back 3–4 years instead of the full statute of limitations
- Reduced or waived penalties: Many states waive penalties entirely for VDA participants, though you still owe the tax and interest
- Anonymity: You can start the VDA process anonymously through a representative, so the state doesn't know who you are until you're ready to commit
We recently helped a client resolve $140,000 in sales tax exposure across 17 states using VDAs, reducing total penalties by 70%. Read the full case study →
What you should do right now
1. Run a nexus analysis. Map every state where you have physical nexus (inventory, employees, offices) and economic nexus (sales above threshold). For FBA sellers, pull your Amazon Fulfilment Reports to see where your inventory has been stored.
2. Register in every nexus state. If you're not already registered, register now. The longer you wait, the larger the past-due liability grows.
3. Consider a VDA for past exposure. If you've had nexus in a state for months or years without collecting, a VDA is almost always the best path forward. Don't wait for the state to find you — the terms are much worse if they come to you first.
4. Set up ongoing compliance. Monthly or quarterly filings in every nexus state. This can be automated with tools like TaxJar or Avalara, or handled by your accounting team.
5. Separate marketplace from direct sales. Make sure your accounting system tracks marketplace sales (where the platform collects tax) separately from direct sales (where you're responsible for collection).