E-commerce Sales Tax 2025 Compliance Guide

Sales tax rules changed a lot after the Wayfair decision. Online stores can create tax duties in states where they have no office or warehouse. Many teams still guess and hope it works out. This guide gives a clear path. You will learn how to confirm where you owe tax, how to register, how to set up your store, and how to file without last minute stress.

What sales tax nexus means for online sellers

Nexus is a link between your business and a state. If you have nexus in a state, you must register, collect tax on taxable sales, file returns, and send the tax to the state. Nexus can come from physical presence, from sales volume, or from how you sell through marketplaces. Each state sets its own rules and thresholds. Your job is to check the rules, write them down, and follow a steady process.

Types of nexus that affect e-commerce

Most online sellers face three common types.

1. Physical presence nexus
   You create nexus when you have people, a store, a warehouse, or inventory in a state. Inventory stored in a third party warehouse can count. For example, goods stored in a marketplace fulfillment center may create nexus in that state.
2. Economic nexus
   You create nexus when your sales into a state pass a set threshold within a year. Thresholds differ by state. Some use a revenue limit. Some also look at the number of transactions. When you cross the threshold, you must register and start collecting by the next period the state allows.
3. Marketplace facilitator rules
   Marketplaces often must collect and remit tax on sales they process. This can reduce your filing work for those orders. You may still need to register in the state and file a return that reports marketplace sales. You also need to collect on orders from your own site.

Write which of these apply to you in each state. Keep the notes short and current.

Step 1: Confirm where you have nexus

Start with a simple map.

• List every state where you ship orders
• Mark where you have inventory, contractors, or staff
• Pull 12 months of sales by state from your cart and marketplaces
• Compare your sales to each state’s threshold and rules
• Mark states you already registered in

Create a one page sheet for leadership. It should show three lists: states with clear nexus now, states to monitor, and states not relevant. Update it each quarter or when sales jump.

Checklist

• States with inventory or people
• States where sales pass the threshold
• States covered by marketplace collection
• States to monitor by month

Step 2: Register before you collect

You must register with a state before you collect its tax. Each state uses its own portal and requires basic info like legal name, FEIN, locations, and start date.

Decide how you will file. Some states ask for monthly returns at first and may move you to quarterly or annual later. Mark filing frequency and due dates in your calendar as soon as you receive them. If you sell only through a marketplace in a state and the marketplace collects, you may still need a registration. Follow the state’s instruction on how to report marketplace sales.

Checklist

• Registration submitted with correct start date
• Filing frequency recorded
• Marketplace reporting duty confirmed
• Certificate or account number saved in a central folder

Step 3: Configure your store and marketplaces

Your tax setup must match your registrations and product rules.

• In your cart: turn on tax collection for states where you are registered. Choose destination based or origin based rules as the state requires. Set ship from locations and enable tax on shipping if the state taxes it.
• In marketplaces: confirm marketplace collection is on for relevant states. Make sure your SKUs and product codes match between your store and the marketplace so reporting is clean.
• Rates and local areas: many states have state, county, city, and special rates. Use a reputable rate provider or your platform’s rate service. Avoid manual rates unless you have very few orders.

Test one order per state before you go live. Save screenshots of settings and test invoices. This will help during audit and during handoffs.

Checklist

• Cart settings match registrations
• Marketplaces set to collect where required
• Product tax codes assigned
• Test orders validated and saved

Step 4: Handle product taxability and exemptions

Not every item is taxed the same way. Some states treat clothing, food, or software in different ways. If you sell software or digital goods, confirm whether the state taxes access, downloads, or support.

• Product tax codes: assign clear codes in your cart. Keep a simple table that shows SKU, description, and code.
• Exempt customers: if you sell to resellers, schools, or other exempt buyers, request a valid certificate. Store the certificate with the customer record.
• Shipping: some states tax shipping, some do not, and some tax only when shipping is part of the sale. Set rules in your cart for each state.
• Bundles: when you bundle taxable and exempt items, the whole bundle may be taxed. If you want different treatment, list items separately on the invoice.

Checklist

• Product tax codes assigned and reviewed
• Exemption certificates on file and not expired
• Shipping tax rules set by state
• Bundle rules defined and applied

Step 5: Reconcile, file, and remit

Close the month with a steady routine. You need three data sets: orders, payouts, and your bank.

1. Orders: export sales by state, tax collected by state, and tax exempt sales.
2. Payouts: pull fees and marketplace settlement reports. For marketplace states, pull reports of marketplace collected tax.
3. Bank: match deposits to payouts.

Reconcile totals. Differences come from timing, refunds, and rounding. Keep a small clearing account for each processor. When returns are filed, pay on time to avoid penalties. If you use a filing service, confirm that they filed and the amount paid matches your books.

Checklist

• Sales, tax, and exemptions tie to reports
• Marketplace sales and tax reported as the state requires
• Returns filed and payments sent by the due date
• Copies of returns and confirmations saved in a shared folder

Step 6: Build a 90-day plan

A short plan gets you from guesswork to a stable process.

Days 1 to 30

• Finish the nexus map and confirm states with duty now
• Register in high priority states
• Turn on tax for those states in your cart and test orders

Days 31 to 60

• Assign product tax codes and set shipping tax rules
• Add exemption certificate collection to onboarding for B2B
• Run the first full month reconciliation and file on time

Days 61 to 90

• Add remaining states from the map
• Set a monthly review of thresholds for states to monitor
• Document the close checklist and owner roles

Special cases to watch

• Inventory in third party warehouses: inventory stored by a fulfillment partner can create nexus. Review warehouse locations and confirm states.
• Drop shipping: some states require you to collect tax when you act as the retailer even if a supplier ships the item. Get resale certificates to your suppliers where allowed.
• Digital products and software: the rules vary by state and by how you deliver access. Align your product codes and billing terms with how you sell.
• Freight and handling: if you add handling or insurance, check if they are taxable with shipping in each state.
• Local taxes: some cities and districts set extra rates. Use a reliable rate source and keep ship to addresses clean.

Risks and simple fixes

Collecting without registering
Fix by registering first, then turning on collection. If you already collected, contact the state about how to file and remit for prior periods.

Missing marketplace reporting
Fix by adding marketplace reports to your close. Many states want you to show marketplace sales even when the marketplace collected the tax.

No proof for exempt sales
Fix by storing valid certificates. Set reminders for expirations. If a buyer does not provide a certificate, collect tax.

Wrong product codes
Fix by running a quarterly product review. Check new SKUs and bundles. Update codes in your cart and in the rate engine.

Late or missed filings
Fix by adding due dates to a shared calendar. Assign backups. Use a filing service if your state count grows.

Threshold surprises
Fix by tracking sales by state each month. When a state nears its threshold, plan the registration date and change settings in advance.

Next steps

Share the nexus map with leadership. Approve the registration list and due dates. Turn on tax for confirmed states and test orders. Tag products with the right codes and set shipping rules. Build a simple close checklist and assign owners. In 90 days, you can move from risk to a repeatable process that scales with your store.

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