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How do I know if I need to collect sales tax in other states?

The rules changed in 2018. Before that, you only had to collect sales tax in states where you had a physical presence like a store, warehouse, or employee. The Supreme Court’s Wayfair decision changed everything. Now states can require you to collect sales tax based purely on how much you sell to their residents.

This is called economic nexus. Each state sets its own threshold. Most use $100,000 in sales or 200 separate transactions in a calendar year, whichever you hit first. Some states only look at dollar amounts. The numbers vary, so you need to check each state where you’re making sales.

A few situations commonly trigger out-of-state sales tax obligations. Selling on Amazon is a big one, especially if you use Fulfilled by Amazon. Your inventory sitting in Amazon warehouses across the country creates physical nexus in those states regardless of your sales volume there. Selling through Shopify, Etsy, or your own website to customers nationwide can push you over economic thresholds in multiple states at once. Having employees or independent contractors working remotely from other states can create nexus. Even attending trade shows where you take orders sometimes counts.

Track your sales by state throughout the year. Most accounting and e-commerce platforms can generate reports showing where your customers are located. When you approach a state’s threshold, you need to register to collect sales tax there before you cross it. Waiting until after creates back-tax liability and potential penalties.

This gets complicated fast. Managing registration, collection rates, filing schedules, and remittance across multiple states is a real administrative burden. Different states have different rates, different product taxability rules, and different filing frequencies. Most small businesses that hit this point use automation software like TaxJar or Avalara to handle calculations and filings.

If you think you might have nexus in other states and haven’t been collecting, don’t ignore it. Most states offer voluntary disclosure agreements that let you come into compliance with reduced penalties. The longer you wait, the more exposure you build up.

Virginia-based businesses selling locally don’t usually need to worry about this. But if you’re shipping products across the country or selling online, it’s worth running the numbers. A Tri-Cities bookkeeper who understands multi-state sales tax can help you figure out where you have obligations and set up systems to stay compliant before it becomes a problem.

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More Questions

I haven't done any bookkeeping since I started my business. Is it too late?

No, it's not too late. Bank and credit card statements can be used to reconstruct your records even if you never tracked anything. The longer you wait, the harder it gets, but catching up is almost always possible.

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I'm months behind on my bookkeeping. Where do I start?

Start by gathering all your bank and credit card statements for the missing months. Check for urgent deadlines like quarterly taxes or pending loan applications, then work through reconciliation one month at a time starting with the oldest.

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Should I run payroll myself or use a payroll service?

You can run payroll yourself with software, but the time investment and compliance risk grow with each employee. Most small businesses benefit from outsourcing once they reach three to five employees or have complex pay structures.

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Do I need a business license to operate in Richmond?

Yes, you need a BPOL (Business Professional and Occupational License) to operate in Richmond. The annual fee is based on your gross receipts, and some industries require additional permits beyond the basic license.

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Can QuickBooks handle payroll for my business?

Yes, QuickBooks Payroll handles wages, tax calculations, filings, and direct deposit for most small businesses. Whether it's the right choice depends on your employee count and how much time you want to spend managing it yourself.

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What's the best way to track business expenses?

The best expense tracking system is one you'll actually use consistently. Separate business and personal finances, capture receipts immediately, and reconcile weekly instead of waiting until month-end.

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