Partner, SDO CPA LLC / CEO, Growthy
You open one Shopify store. You sell to buyers across the country. It feels like one business, in one place, with one ecommerce sales tax nexus problem.
It isn't. A 2018 Supreme Court case changed the rule. A state can now require you to collect sales tax based on how much you sell into that state. You don't need an office there. You don't need a warehouse or a single employee there. Your sales volume alone can create the obligation.
This guide is for the bookkeeper who just took on an ecommerce client, and for the founder reading their own profit and loss statement. It answers two questions. Where does a collection obligation start? And how do you record the money once you collect it?
Tools like TaxJar and Avalara help you file. This guide covers something they don't: how a bookkeeper treats sales tax in the books. Thresholds vary by state, and they change often. So the goal here is the pattern, plus a pointer to the verified state guide, not 45 numbers to memorize.
What is ecommerce sales tax nexus?
Nexus is a connection to a state strong enough to require you to collect its sales tax. Economic nexus is the newer kind: an obligation to collect once your sales into a state pass a threshold, even with no physical presence there. It comes from South Dakota v. Wayfair (2018). The most common revenue threshold is $100,000 in annual sales into a state, and many states use that as the only trigger. California sets a higher bar at $500,000, with no transaction test. Four states have no statewide sales tax at all: Delaware, Montana, New Hampshire, and Oregon. Collected sales tax is never your revenue. It is money you hold for the state, so it belongs in a liability account until you send it on.
Nexus is the link between your business and a state that lets the state tax your sales. For decades, that link meant physical presence. You collected sales tax where you had a location, inventory, or people. If you had no footprint in a state, you owed it nothing.
That rule broke in 2018. In South Dakota v. Wayfair, the Supreme Court allowed states to base the obligation on sales volume instead. This is economic nexus for ecommerce sellers: you can owe sales tax in a state once your sales into it cross a set amount, even with no physical presence there. For an online seller who ships everywhere, this is the whole game.
Physical nexus still exists. It comes from having something tangible in a state. A storefront counts. So does staff. So does inventory, which matters for ecommerce: if you use Amazon's fulfillment network, your stock can sit in a warehouse in a state you've never visited. That stored inventory can create physical nexus on its own.
Economic nexus is different. It doesn't need anything tangible. It needs only enough sales into the state. The amount is the state's threshold, and crossing it switches on your duty to collect.
Each state sets its own threshold. There's no single national number to learn. What you can learn is the common shape.
The most common revenue threshold is $100,000 in annual sales into a state. Many states use that figure as the only trigger. California is the notable exception with a higher bar: $500,000 in sales, with no transaction test at all.
Some states have no statewide sales tax, so there's no threshold to cross. Those are Delaware, Montana, New Hampshire, and Oregon. Alaska is a special case. It has no statewide sales tax, but its local jurisdictions can impose one, so sales there aren't always tax-free.
Because each state's rule differs, you confirm the current threshold for each state against a maintained guide. The account side of this, where the collected money lands, comes later in this guide and in the ecommerce chart of accounts breakdown.
Here's the part that surprises new sellers. One online store sells into nearly every state. So in a single year, a growing seller can approach or cross ecommerce sales tax nexus thresholds in many states at once.
That's why nexus isn't a one-time setup task. It's something you watch as you grow. We return to that monitoring problem at the end of this guide.
For a seller on more than one channel, this is the most useful rule to get right: the marketplace collects and remits for you, but your own store doesn't. Get this wrong and you either pay twice or under-report.
A marketplace facilitator is a platform that handles the sale on a seller's behalf. In every state that has a sales tax, marketplace facilitators must collect and remit sales tax for their third-party sellers. Amazon, Etsy, and Walmart all fall under this rule.
When you sell on Amazon, Etsy, or Walmart, the platform does the sales tax work for you. It calculates the tax, collects it from the buyer, and remits it to the state. This applies in every state that has a sales tax.
For you, that tax is handled. You don't remit it again. Sending it a second time means paying the state money it already has.
One nuance to watch: marketplace sales can still count toward a state's economic nexus threshold, even when the marketplace is the one remitting. Whether they count varies by state, so you verify each state's rule against the maintained guide rather than assume one national answer.
Your own Shopify store works differently. Shopify isn't a marketplace facilitator for your own storefront. So on direct Shopify-store sales, you collect and remit the shopify sales tax yourself. This is where your own filing duty lives.
There's one twist. Shopify's Shop App does act as a marketplace, and it collects and remits like one. So sales through the Shop App follow the marketplace rule, while sales through your own Shopify storefront don't.
The step-by-step reconciliation of a Shopify payout, including how fees and tax flow through, lives in the shopify bookkeeping guide.
Now put it together. Say you sell on Amazon and on your own Shopify store. Amazon remits the tax for its channel. You remit the tax for your Shopify channel. Two channels, two different rules.
Your chart of accounts has to keep these apart. Marketplace-collected tax passes through; it's not yours to remit. Direct-sale collected tax is a real liability you owe the state. If the books mix them, you lose track of what you actually owe. The account setup that keeps them separate is in the ecommerce chart of accounts guide.
This is the part filing tools skip, and the part a bookkeeper owns. The rules are short. Read them once and apply them every time.
Collected sales tax is a liability on the balance sheet. A good home for it is a Sales Tax Payable account. Sending the money to the state reduces that liability. It's not an expense. And money you've collected but not yet sent is never revenue.
When a buyer pays sales tax, you're holding the state's money. You didn't earn it. It's not yours to keep.
So it doesn't belong on your profit and loss statement as income. If you book it as revenue, your top line looks bigger than it is, and your profit looks bigger than it is. The correct home is a liability account, such as Sales Tax Payable. The buyer's tax dollars sit there until you pass them to the state.
Walk the money through three steps.
First, you collect. Cash comes in, and an equal amount is credited to Sales Tax Payable. The liability rises by the tax you took.
Second, you hold. That liability sits on the balance sheet until the filing due date arrives.
Third, you remit. You pay the state. Cash goes down, and the liability goes down by the same amount. The profit and loss statement is never touched.
That last point is the one bookkeepers get wrong. Remittance isn't an expense. If you record the payment to the state as an expense, your profit drops for no real reason, and the liability on the balance sheet never clears. The payment simply settles a debt you were already carrying.
Two entries cover the full lifecycle.
When you collect sales tax on a sale (say, a $100 product with $8 tax):
The $8 goes straight to the liability, not revenue. It's the state's money from the moment it arrives.
When you remit to the state:
No income statement account is touched. The liability clears. That's it. If you see a "Sales Tax Expense" debit anywhere, the entry is wrong — remittance isn't an expense, it's settling a debt you were already carrying.
Tie this back to the channel rules. Tax that Amazon, Etsy, or Walmart collect and remit shouldn't sit in your Sales Tax Payable. You never owe that money to the state. The marketplace does.
Only direct-sale collected tax becomes your liability. Keep the marketplace-collected amounts visible for reconciliation, often in a clearing or memo account, but never as a payable you plan to remit. For exactly where each amount belongs, see the ecommerce chart of accounts guide, and for how this fits the full monthly close, the ecommerce bookkeeping pillar.
A growing multi-channel seller needs a nexus monitor, not a year-end surprise. The thresholds you cross today set the states you must register in tomorrow. Miss one and you can owe back tax you never collected.
Your total revenue tells you nothing about nexus. The signal is sales by destination state. You need a running total of what you sell into each state, so you can see which ones you're getting close to.
This starts as a bookkeeping problem before it's a filing problem. The books have to tag revenue by the ship-to state. Without that tag, you're guessing.
Once your sales into a state cross its threshold, you register for a sales tax permit there before you start collecting. The order matters: register first, then collect, then remit. Registering in a new state also adds a new Sales Tax Payable sub-account to track that state on its own.
This is the point where you confirm the specifics with a tax professional. A guide can teach the pattern. Your exact duties depend on your states, your products, and your sales, so check them with someone who can advise on your situation.
A static spreadsheet ages badly here. States are repealing the 200-transaction part of the old rule and moving to a revenue-only test.
More than 16 states had dropped the 200-transaction count by January 1, 2026. Illinois dropped it on January 1, 2026. Utah dropped it on July 1, 2025. Alaska dropped it on January 1, 2025. Kentucky drops it on August 1, 2026. The trend is clear, but a shrinking number of states still count transactions, so you verify each state's current rule rather than assume the old formula.
A threshold that was true last year may be gone this year. That's the case for a running view of per-state sales instead of a year-end scramble. Growthy tags and totals your sales by state as you grow, so the data is ready when a threshold gets close.
The pattern is the same across every state and every channel: economic nexus ecommerce rules create a collection obligation once sales volume crosses a threshold, physical presence is no longer required to trigger that duty, and those thresholds keep shifting as states repeal the old 200-transaction test.
Who remits depends on the channel. Marketplace facilitators — Amazon, Etsy, Walmart — collect and remit on your behalf in every state with a sales tax. Your own Shopify store doesn't get that treatment. Direct-store sales are your filing duty, and the shopify sales tax you collect sits in your books as a liability until you send it on.
The bookkeeping side comes down to one principle: collected sales tax is a liability, not revenue. It lands in Sales Tax Payable, clears when you remit, and never touches the profit and loss statement. Hold that structure firm and the accounting stays clean no matter how many states you're registered in.
Verified against the Sales Tax Institute Economic Nexus State Guide and Avalara state-by-state guides on 2026-06-24.
Growthy is bookkeeping software, not a CPA firm. This content is educational, not professional advice.
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Bobby Huang • Partner, SDO CPA LLC / CEO, Growthy
CPA firm partner who got tired of watching bookkeepers click categorize 500 times a day. Built Growthy to fix it.
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