Sales tax is collected by the seller at the point of sale and remitted to the state. Use tax is the buyer's obligation — it kicks in when you purchase something without paying sales tax and then use it in a state that has a tax on it. For example, if you buy equipment from an out-of-state vendor who doesn't charge you sales tax, your state may expect you to self-report and pay use tax on that purchase. Most businesses don't realize use tax is even a thing until an auditor brings it up. If you're unsure whether you have a use tax obligation, that's exactly the kind of thing we help sort out.
Read more: Sales Tax vs Use Tax: What’s the Difference?
Not at all. Physical nexus is the law of the land in every state. If you’re operating in the state, you’re going to have to register, collect, and remit sales tax there.
As with economic nexus, the qualifying criteria for physical nexus vary by state.
Many businesses make the false assumption that if their services do not coincide with goods sold, then these services are not taxable. That simply is not true and can be a costly assumption. Here are some things to consider when determining the taxability of your services.
The short answer is: you need to look at your sales data by state and compare it against each state's economic nexus thresholds.
Most states use a threshold of $100,000 in sales or 200 transactions in a calendar year, but the rules vary — some states look at the prior year, some at the current year, and some at a rolling 12-month window. Physical presence (like employees, inventory, or attending trade shows) can also create nexus independent of your sales volume. This is where a nexus analysis pays for itself — we'll map exactly where you're exposed so there are no surprises.
You can use our Nexus Calculator to check on your nexus status in any specific state.
You need to register before you start collecting sales tax in a state — and you should start collecting as soon as you've triggered nexus there. Waiting too long creates back liability, which can be a much bigger and more expensive problem to clean up than just registering proactively.
If you're not sure whether you've crossed a threshold, don't guess.
Let's look at the data together and get you registered in the right states at the right time.
It depends on the state.
Most states count gross sales toward the threshold — meaning all of your sales into that state, whether taxable or not. A handful of states only count taxable sales. This distinction matters more than people think, especially if you sell a mix of taxable and exempt products.
Getting this wrong in either direction (over-registering or missing a threshold) creates unnecessary cost or exposure. We know how each state counts and can make sure your analysis is accurate.
It can...
Physical presence nexus didn't go away after Wayfair, it definitely still exists.
Attending a trade show, sending employees to a job site, or doing installation work in another state can all create physical nexus, sometimes even from a single visit depending on the state.
Construction companies especially need to be careful here, since project work in a new state can trigger nexus almost immediately. If you're working across state lines, it's worth doing a quick nexus review before your next project kicks off.
Most states require you to stay registered and continue filing once you've crossed the threshold — even if your sales drop below it in a subsequent year. Some states have provisions for deregistering if you fall below the threshold for a sustained period, but the rules vary significantly.
You generally can't just stop filing without formally closing out your registration, which is its own process. This is the kind of ongoing compliance detail that's easy to miss when you're managing it alone.
Generally, states look at gross sales before returns and refunds when measuring your threshold. So a high-volume refund period doesn't necessarily reduce your nexus exposure for that year. That said, rules differ by state, and some allow net sales figures.
Don't assume refunds will save you from a threshold you've already crossed — it's worth verifying with an expert the specific rules for each state you're watching.
Yes, almost always.
Storing inventory in another state (whether in your own warehouse or a third-party fulfillment center) is one of the most common and overlooked ways to create physical nexus. This catches a lot of Shopify and e-commerce sellers off guard, especially those using 3PLs or prep centers.
If you're storing product somewhere, you likely have nexus there, full stop.
The good news is there's a clear path to getting registered and compliant — we can walk you through it.
If you do have nexus in a state, you most likely will be required to register with that state. Once you register, you will be issued a filing frequency (monthly, quarterly, or annually) when you are issued your sales tax permit. Therefore, the state expects to hear from you on that due date, even if it is as a “zero return” file.
In short, yes.
States audit companies of all sizes. Even super small businesses that only sell in one state could have big problems if they aren’t aware of their business’s tax consequences and are audited.
Don't panic, but don't ignore it either.
A notice can mean a lot of things — a missed filing, an unpaid balance, a registration requirement, or the beginning of an audit. The worst thing you can do is let it sit. Read it carefully, note any deadlines, and reach out to a sales tax professional as soon as possible.
We deal with state notices regularly and can quickly assess what's going on and what needs to happen next. Most situations are very fixable — but they get harder the longer you wait.
You're not alone — this is one of the most common situations we see.
The exposure is real, but it's also manageable with the right approach. Depending on how long you've been selling and in which states, you may be looking at back taxes, penalties, and interest. The good news is there are tools like Voluntary Disclosure Agreements (VDAs) that can significantly limit your lookback period and waive penalties. The worst thing you can do is keep selling without addressing it. Let's figure out where you stand and build a plan to clean it up.
A VDA is a formal agreement between you and a state that allows you to come forward voluntarily to resolve past sales tax liability — usually in exchange for a limited lookback period (typically 3-4 years instead of the full audit window) and a waiver of penalties. It's one of the most powerful tools available for businesses with past exposure, and it's almost always better than waiting for the state to come to you. Not every situation calls for a VDA, and the process requires careful handling to make sure you don't inadvertently create more exposure than you're resolving. This is exactly the kind of situation where having an experienced team in your corner makes a real difference.
Yes — and this is treated very seriously by states.
Collecting sales tax from your customers and then not sending it to the state is considered misappropriation of public funds in many jurisdictions. Penalties can be significant and in some cases can be assessed personally, not just against the business. If you've been collecting but not remitting, the priority is to get current as quickly as possible. We can help you assess the situation and find the most efficient path to resolution.
The standard lookback period in most states is 3 to 4 years, but it can go longer (sometimes indefinitely) if the state believes there was fraud or if you never registered at all. The clock typically starts from when you should have registered, not when you actually did. This is why unregistered sellers often face the biggest exposure.
A voluntary disclosure agreement can help cap that lookback window if you act before the state reaches out to you first.
You should be keeping:
Most states expect you to retain these for at least 3 to 4 years, though longer is safer. The exemption certificates are especially important — if you make a tax-exempt sale and can't produce a valid certificate during an audit, you may be on the hook for the tax yourself. Getting your recordkeeping organized before an audit hits is one of the highest-value things you can do. We can help you build systems that make this painless.
Taxability varies widely by state and product/service type. Generally, the following hold true:
Most tangible personal property is taxable.
Some services are taxable, depending on the state.
Digital products may or may not be taxable.
Some items, like groceries or prescription medications, are often exempt.
To determine the taxability of your specific products or services, do the following:
Check our What Is Sales Tax guide for general information.
Research the specific laws for each state where you have nexus.
Consult with a sales tax professional for complex situations.
No — that's what a resale exemption is for.
When you purchase items specifically to resell them, you should be buying them tax-free by providing your vendor with a valid resale certificate. Then you collect sales tax from your end customer when you sell. Sales tax is designed to be a one-time tax on the end consumer — not collected at every step of the supply chain. If you've been paying tax on items you resell, you may be overpaying and we can help you fix that.
It depends entirely on the state.
Some states tax digital products the same as physical goods, some exempt them, and some have specific rules for different categories — SaaS is taxed differently than downloaded software in many states, for example.
This is a rapidly evolving area as states update their laws to keep pace with the digital economy. If you sell any kind of digital product or subscription, it's worth doing a proper taxability review by state rather than assuming one rule applies everywhere.
Sometimes.
Whether shipping is taxable depends on the state, how the charge is presented on the invoice, and whether the underlying product being shipped is taxable.
Some states always tax shipping, some never do, and others only tax it when it's bundled with the sale price or when the item itself is taxable.
This is one of those areas where the details really matter, and getting it wrong in either direction can create liability or unnecessary overcharging of your customers.
A resale certificate (sometimes called a reseller's permit or exemption certificate) is a document you provide to your supplier that authorizes you to purchase goods tax-free because you intend to resell them. Most states issue these as part of the sales tax registration process — once you're registered in a state, you have the right to use a resale certificate for purchases in that state.
The tricky part is that each state has its own certificate format, and vendors are supposed to collect state-specific certificates. We can help you make sure your certificates are valid and that you're not leaving money on the table by overpaying tax on your inventory purchases.
This is one of the most nuanced areas of sales tax.
In most states, materials that are permanently incorporated into real property are taxable at the time the contractor purchases them (meaning the contractor pays the tax, not the customer). But the rules vary widely: some states tax the final sale of the project, some tax materials and exempt labor, some exempt everything for certain project types. Labor is often exempt, but not always.
If you're doing any kind of construction, renovation, or installation work across multiple states, you really need a state-by-state taxability analysis. The exposure in this industry is significant and often underestimated.
Sales to businesses that are reselling your product are generally exempt — but only if you collect a valid exemption or resale certificate from your buyer. Without that documentation, you're technically on the hook for the tax if audited. The burden is on the seller to have valid certificates on file. (Make sure they are signed and dated!) Managing this across hundreds or thousands of customers is one of the trickier compliance challenges for distributors and wholesalers. We help businesses build systems to collect and store certificates properly so an audit doesn't become a disaster.
Bundling (where a taxable product and a nontaxable service are sold together for one price) is a common source of audit issues.
Some states will tax the entire bundle if any part of it is taxable, others require you to break out the charges separately, and others have specific rules based on which component is the "true object" of the sale. There's no universal rule here. If you sell packages, kits, or service-plus-product bundles, it's worth reviewing how each state treats them to avoid both over-collecting and under-collecting.
Platforms like Amazon or Etsy are also referred to as “marketplaces” and are liable to collect and remit sales tax on behalf of sellers (marketplace facilitator laws). While this absolves you from sales tax matters in most cases, you may still have sales tax obligations depending on your situation.
Here are some things to be aware of:
State(s) where you have established physical nexus may still ask that you be registered with the state tax commission and file returns stating $0 sales tax collected and remitted, noting that the marketplace facilitator is handling sales tax for you. This varies by state.
You will still want to keep track of your sales across all platforms, including these marketplaces, to determine whether you’ve triggered economic nexus.
If economic nexus has been triggered, you will be required to collect and remit sales tax for any sales made outside of the marketplace platform when that sale comes from the location where nexus was triggered.
For platform-specific guidance, consult our resources or speak with a sales tax expert.
The best sales tax software for your business depends on your specific needs, budget, and sales volume.
Some popular options include Ceretax, Avalara, Vertex & more.
To choose the right software:
2. Consider factors like integration with your e-commerce platform, automation capabilities, and pricing
3. Take advantage of free trials offered by software providers
4. Consult with a sales tax expert for personalized recommendations
Remember, while software can help automate many aspects of sales tax compliance, it's still important to understand your obligations and ensure the software is set up correctly for your business. Utilizing a consultative approach may be the best route for you and your business.
It depends on your situation...
We don't believe in cookie-cutter pricing for situations that aren't cookie-cutter.
The best place to start is a free "What's Next" call with one of our sales tax experts. We'll learn about your business, help you understand your exposure, and give you a clear picture of what it would cost to get compliant and stay that way.
Just talking is always free.
Shopify can calculate and collect sales tax at checkout using either Shopify Tax (Shopify’s in-house tax engine) or Avalara for Shopify (An integration powered by Avalara’s AvaTax engine). But collection is only one part of the equation. Shopify does not:
That's all still on you. A lot of Shopify sellers think they're covered because the platform is "set up for taxes," and then they're blindsided when they realize they've been collecting in states where they were never registered. We work with Shopify sellers regularly and can help you close the gap between what Shopify does and what full compliance actually requires.
Read about Shopify's sales tax adjustments in 2025: Big Changes for Shopify Plus Users Relying on AvaTax
Your nexus thresholds are cumulative across all channels: your Shopify store, your own website, wholesale orders, and any other sales all count together toward each state's threshold. This is where a lot of multi-channel sellers get tripped up. You need to be aggregating your sales data across every channel to know where you've actually crossed a threshold.
We help businesses pull that picture together so you know exactly where you stand — and we can set up the monitoring to keep you informed as your business grows.
Software like TaxJar or Avalara is great at automating rate calculations and, in some cases, filing returns. But software doesn't think. It doesn't know if you've been registered in the right states, it doesn't catch taxability issues specific to your products, it doesn't negotiate with states on your back liability, and it doesn't pick up the phone when something goes wrong.
We work with software tools every day, we can even help you set them up efficiently for your specific situation. But we pair that powerful automation with real accountants and consultants who understand your business and can actually solve problems. It's the difference between a tool and a team.
Possibly, yes.
Even if a marketplace facilitator like Amazon or Etsy is collecting and remitting tax on your marketplace sales, many states still require you to file a return, sometimes even a zero-dollar return, to stay in good standing. And if you have any sales outside of the marketplace (your own website, for example), you may have separate obligations entirely.
The rules around marketplace facilitators and seller obligations vary by state. Don't assume marketplace collection means you're fully in the clear. It's worth verifying your specific filing obligations.
Unfortunately, no.
Collecting is just step one. Full compliance means you're registered in every state where you have nexus, collecting the right amount on the right products, filing returns on time in each state, and remitting what you've collected.
Shopify helps with collection, but the rest is still your responsibility. We talk to sellers all the time who have been collecting for years but never registered or filed — which actually creates its own problem, because you've collected money you haven't turned over to the state. If you're not sure where your gaps are, let's find out together.
