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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

Which products and services require sales tax in Virginia?

Virginia taxes most tangible goods sold at retail but exempts most services. Groceries have reduced rates while prepared food is fully taxable. The rules vary depending on what you sell and who you sell it to.

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What happens if I don't keep good financial records?

Poor records lead to expensive tax prep, missed deductions, IRS audit risk, and cash flow surprises. Banks won't lend without clean financials, and selling your business becomes nearly impossible.

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What's the best way to handle inventory for an e-commerce business?

Inventory tracking for e-commerce requires systems that sync across sales channels and connect to your accounting software. The challenge isn't just counting what you have. It's making sure your books reflect accurate costs and quantities without manual data entry creating errors.

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How do I track tip income and tip-outs for my restaurant?

Track tips daily using your POS system or a written tip log, record all tip-outs to support staff, and run tips through payroll since they're taxable wages. Both credit card and cash tips need documentation.

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How do I know if my books are a mess?

There are clear warning signs: bank accounts that don't reconcile, surprise tax bills, financial statements that don't match reality, and transactions piling up uncategorized. If you're avoiding your books, that's usually confirmation enough.

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How do I set up classes and locations in QuickBooks Online?

Go to Settings, then Account and settings, then Advanced. Enable class and location tracking there. The harder part is deciding how to structure them before you start.

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