Why Marketplace Sellers Still Need to Track Sales Tax Thresholds
If you’re an eBay, Etsy or Amazon seller, you’ve likely breathed a sigh of relief over the last few years thanks to Marketplace Facilitator laws. These rules require platforms like eBay and others to calculate, collect, and remit sales tax on your behalf in most states. It made sales tax compliance for small sellers exponentially easier.
But there’s still an important issue to consider: while the marketplace may be collecting and remitting the tax for you, it often doesn’t absolve you of your own sales tax liability and registration requirements.
In the world of e-commerce tax, there’s a crucial difference between the act of collecting the tax and the legal act of establishing nexus. Understanding this distinction is vital for avoiding unexpected tax notices.
Economic Nexus: What is it and what does it mean for you?
Since the South Dakota v. Wayfair Supreme Court decision in 2018, nearly every state has adopted economic nexus laws.
Economic nexus establishes a link between your business and a state based purely on your sales volume or transaction count, regardless of whether you have a physical presence (like a warehouse or office) there.
The typical thresholds are:
- $100,000 in gross sales into the state annually, OR
- 200 separate transactions into the state annually (though many states are dropping the transaction count requirement).
If you meet either threshold in a state, you are generally required to register for a sales tax permit there. The common seller misconception is: If eBay is collecting the tax, my sales shouldn’t count toward my personal nexus threshold.
Unfortunately, a large number of states disagree.
State-by-State Guide: Does My Marketplace Revenue Count Toward Nexus?
The most critical distinction for any remote seller using Amazon, eBay, Etsy, or other major marketplaces is whether or not the revenue from those sales counts toward the state’s economic nexus threshold (e.g., $100,000 in sales).
The good news is that the majority of states exclude facilitated marketplace sales from the calculation, as the marketplace facilitator is already responsible for collecting and remitting the tax. However, a significant number of states still require you to include all sales (both direct and marketplace) in your nexus calculation.
Group 1: Marketplace Sales are EXCLUDED from Seller’s Nexus Threshold
In these states, every dollar you sell through a platform like eBay, Etsy, or Amazon counts toward your $100,000 (or $500,000) threshold. For example, if you sell $100,000 worth of goods on eBay into California, you have established economic nexus in California. You must register with the state.
In these states, sales made through a registered marketplace facilitator (like Amazon, Walmart, etc.) DO NOT COUNT toward your individual economic nexus threshold. You only need to track your direct sales (e.g., sales from your own website) to determine if you have nexus.
- Alabama
- Arizona
- Arkansas
- Colorado
- Florida
- Georgia
- Illinois
- Indiana
- Louisiana
- Maine
- Massachusetts
- Mississippi
- New Mexico
- North Dakota
- Oklahoma
- Pennsylvania
- Tennessee
- Utah
- Virginia
- Wyoming
Group 2: ALL Sales are INCLUDED in Seller’s Nexus Threshold
In these states, you must include all sales you make into the state (both direct-to-consumer sales AND sales made via a marketplace facilitator) to determine if you meet the economic nexus threshold. If your total gross sales (marketplace + direct) meet the threshold, you must register for a sales tax permit.
- Alaska (Local)
- California
- Connecticut
- District of Columbia
- Hawaii
- Idaho
- Iowa
- Kansas
- Kentucky
- Maryland
- Michigan
- Minnesota
- Missouri
- Nebraska
- Nevada
- New Jersey
- New York
- North Carolina
- Ohio
- Rhode Island
- South Carolina
- South Dakota
- Texas
- Vermont
- Washington
- West Virginia
- Wisconsin
Once you hit nexus, you are legally obligated to register with that state’s taxing authority. Even though the marketplace handles the tax remittance for those platform sales, you will still be required to file a sales tax return (often a “zero return” or a return where you report marketplace sales as exempt/deductible sales) to stay compliant. If you also make direct sales (e.g., through your own Shopify store), you must begin collecting and remitting tax on those direct sales immediately.
What should Marketplace sellers do?
As an e-commerce seller, especially one growing rapidly across platforms, you must maintain a single, comprehensive view of all your sales data.
- Track Gross Sales: Use tools like Seller Ledger to aggregate every sale—eBay, Amazon, Etsy, and your own website—by state. This gross total is what you’ll use to check against most states’ economic nexus thresholds.
- Monitor Your Direct Sales: Keep a separate tally of your sales that are not processed by a marketplace facilitator. This number is essential for compliance in states that exclude marketplace sales from the calculation.
- Register When Necessary: If your total gross sales trigger nexus in a state like California, you must register, even if you don’t collect any tax yourself due to the Marketplace Facilitator law. Failure to register when nexus is met is a non-compliance issue that can lead to penalties down the road.
Don’t let the simplicity of Marketplace Facilitator laws blind you to your own economic nexus obligations. The sales tax burden might be gone, but the compliance burden remains.