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Sales tax nexus by state. When you owe outside Minnesota.
Since the Supreme Court's 2018 South Dakota v. Wayfair decision, your e-commerce business can owe sales tax in states you've never physically been to. Each state has its own threshold — usually $100,000 in sales or 200 transactions. This guide walks through how to figure out where you're registered, where you should be, and how to handle filings without it eating your life.
9 min read· Twin Cities, Minnesota
The short version
- What changed in 2018: the South Dakota v. Wayfair Supreme Court ruling allowed states to require sales tax registration based oneconomic activity, not just physical presence. Every state has adopted some version since.
- Most common threshold: $100,000 in sales OR 200 separate transactions into a state during the prior or current calendar year. A handful of states use higher dollar thresholds or sales-only (no transaction count).
- Marketplace facilitator laws: sales on Amazon, Etsy, Walmart Marketplace, eBay are generally collected and remitted by the platform itself in nexus states. Direct-to-customer sales (Shopify, your own site) are your responsibility.
- The big platforms (TaxJar, Avalara, Sovos)automate registration, calculation, and filing once you’re set up. The cost is well below what manual filing across 10 states would take.
What 'nexus' actually means.
Nexus is a fancy word for “connection that gives a state the right to tax you.” Pre-2018, nexus required physical presence — an office, employee, inventory in a warehouse. If you only sold online into a state, you didn’t owe their sales tax.
The Wayfair ruling created economic nexus. States can now require you to register, collect, and remit sales tax just based on how much you sell into that state — even if you’ve never set foot there.
Two types of nexus to track:
- Physical nexus — you have property, employees, contractors, or stored inventory in the state. Almost always means you owe.
- Economic nexus — you crossed the state’s sales/transaction threshold. Most states: $100K or 200 transactions in the prior or current calendar year.
FBA warehouses are a common trap: if Amazon stores your inventory in a state, that’s physical nexus there. The good news is marketplace facilitator laws (below) usually handle the sales-tax side automatically.
Marketplace facilitator laws — the saving grace.
Most states now require platforms like Amazon, Etsy, eBay, Walmart Marketplace, and Mercari to collect and remit sales tax on your behalf for sales made through them. So if you only sell on Amazon, you generally don’t need to register for sales tax in any state on those sales — Amazon does it.
But:
- If you also sell on Shopify or your own site, those direct sales aren’t covered. You need to track those separately for nexus.
- FBA inventory in a state still creates physical nexus there — even if Amazon collects sales tax on Amazon sales, your direct-to-customer sales into that state may now owe tax too.
- Some states require registration even if all your sales go through marketplace facilitators — they want to see you on file. Check each state’s rules.
How to figure out where you have nexus.
Three-step audit:
Step 1. Pull a sales report from each platform (Amazon, Shopify, Etsy, eBay, Walmart, direct site) by state for the prior and current calendar years. Most platforms have this built in.
Step 2.Compare each state’s totals to that state’s nexus thresholds. TaxJar and Avalara publish current threshold charts; just check the state you’re interested in. Don’t double-count marketplace and direct sales unless required to aggregate (some states aggregate, some don’t).
Step 3.For states where you’ve crossed the threshold AND have non-marketplace sales: register, set up tax collection on those sales, and start filing. Once registered, you usually have to keep filing even in months you owe zero (it’s a paperwork annoyance, not a tax problem).
For states where you’ve crossed the threshold but ALL sales went through marketplace facilitators: check the state’s rules; some states require registration anyway, most don’t.
The tools that make this manageable.
- TaxJar— popular with mid-size sellers. Connects to Shopify, Amazon, eBay, etc. Auto-files in registered states. ~$19–$99/mo depending on transaction volume.
- Avalara— enterprise-grade. More expensive but handles complex situations (multi-entity, international, manufactured goods).
- Sovos— similar enterprise tier. Less common for small sellers.
- DIY in each state portal — works for 1–3 states. Doesn’t scale past that.
Most growing e-commerce businesses end up on TaxJar by the time they cross nexus in 5+ states. The cost is well below what an extra day a month of state filings would take.
Minnesota specifics for resident sellers.
If you live in Minnesota and sell e-commerce, here’s where you start:
- Minnesota sales tax registration: register with the Minnesota Department of Revenue if you sell anything taxable to Minnesota customers, regardless of volume. Free, online at revenue.state.mn.us.
- Minnesota local tax: in addition to the state 6.875% rate, many Minnesota cities and counties add local sales tax. Your filing must allocate by location.
- Filing frequency: monthly, quarterly, or annual, set by Minnesota based on your tax liability. You don’t choose — the state assigns based on volume.
- Other states: evaluate one at a time as you cross thresholds. Most high-volume e-commerce sellers end up registered in 10–15+ states within a few years.
What it costs to ignore this.
Sales tax penalties stack faster than people expect:
- Failure-to-file penalty in most states: 5–25% of the tax owed, plus interest.
- States can audit back ~3 years from when they discover you should have been registered. Some are aggressive — sending nexus questionnaires to anyone who sold on Amazon into the state.
- States can’t collect tax from your customer after the fact — so the tax that should have been collected comes out of your pocket. On $100K of sales at 8%, that’s $8,000 you owe but never collected.
The cleanest path is to register voluntarily once you’ve crossed a threshold, before the state finds you. Voluntary disclosure programs in most states waive penalties and limit look-back to 3 or 4 years.
E-commerce books getting tangled?