Before 2018, you only had to collect sales tax in states where you had a physical presence like an office, warehouse, or employee. The Supreme Court’s South Dakota v. Wayfair decision changed that. Now states can require you to collect and remit sales tax based purely on your sales volume into that state. This is called economic nexus, and it applies to almost every e-commerce seller doing meaningful volume.

Most states set the threshold at $100,000 in sales or 200 transactions within a calendar year, though some states have dropped the transaction count and only use the dollar amount. A few states set their thresholds lower. Each state defines “sales” slightly differently too. Some count only taxable sales, others count all sales including exempt ones. You need to check the specific rules for each state where you’re approaching the threshold.

As a California-based business, you already have nexus in California regardless of your sales volume here. You must collect CA sales tax on taxable goods shipped to California customers. That’s your baseline. Every other state where you cross the economic nexus threshold becomes an additional obligation. You register for a sales tax permit in that state, start collecting tax at the rate where your buyer is located, and file returns on whatever schedule that state assigns you (monthly, quarterly, or annually).

Tracking all of this manually is not realistic once you’re selling in more than a handful of states. Tools like TaxJar and Avalara integrate directly with QuickBooks Online and with platforms like Shopify, Amazon, and WooCommerce. They calculate the correct tax rate at checkout based on the buyer’s address, track your sales by state so you know when you’re approaching nexus thresholds, and can even auto-file returns in most states. The monthly cost for these tools pays for itself by keeping you compliant and saving you hours of work.

One thing sellers overlook is that marketplace facilitators like Amazon and Etsy already collect and remit sales tax on your behalf in most states for sales made through their platform. But if you also sell through your own Shopify store or other direct channels, those sales still count toward your nexus thresholds and you’re responsible for collecting and remitting tax on them yourself. You need to track both streams.

Penalties for not collecting sales tax where you have nexus are real. States can assess back taxes for the entire period you should have been collecting, plus interest and penalties. Some states charge 10% or more in penalties on top of the unpaid tax. California alone charges a 10% penalty for late filing. Getting registered and compliant before a state comes looking for you is always the better path.

If you’re already behind, the first step is figuring out where you currently have nexus. Pull your sales data by state for the current and prior year. Identify every state where you’ve crossed the threshold. Then register in those states and start collecting going forward. Some states offer voluntary disclosure agreements that can reduce penalties for past periods, which is worth looking into if you’ve had nexus for a while without collecting.

Ongoing sales tax management is not something you set up once and forget about. New states can trigger nexus as your business grows. Tax rates change. Filing deadlines vary. Someone needs to monitor your thresholds, file returns on time, and reconcile what your platform collected versus what you owe. For a growing e-commerce bookkeeping practice in Orange County, this is one of the areas where having professional support makes the biggest difference between staying compliant and getting buried in state notices.