Sales Tax for Online Sellers, Done Properly
The obligation for online sellers to collect and remit state sales tax where they have a connection, called nexus, including economic nexus based on sales into a state.
Marcus Adeyemi
What is at stake
Since the Supreme Court's 2018 Wayfair decision, states can require remote sellers to collect tax based on sales volume, so tax obligations can arise without any physical presence.
The playbook
- Track sales by state against each state's thresholds
- Register before collecting tax in a state
- Use tax calculation software for rates and rules
- Keep exemption certificates for tax-exempt buyers
- Get advice from a tax professional
Where it goes wrong
Avoid:
- Assuming no physical presence means no obligation
- Collecting tax without registering
- Using a single rate for every address
- Ignoring marketplace sales in threshold calculations
The numbers behind it
| Measure | Figure |
|---|---|
| Nexus | a connection to a state that creates a tax obligation |
| Economic nexus | based on sales volume or transactions into a state |
| Wayfair decision | South Dakota v. Wayfair, decided by the Supreme Court in 2018 |
| Marketplace facilitator laws | many states require marketplaces to collect tax on third-party sales |
Getting outside help
When to hand it over: Bring in help when sales into several states grow, or when you are unsure where you have nexus.
Where this comes from
- U.S. Small Business Administration — Pay taxes
- Stripe Documentation — Stripe Tax
The figures and practices above come from the sources listed.
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Where to go next
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