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
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Virginia employers pay federal FICA and unemployment taxes plus Virginia unemployment insurance. Budget roughly 8% to 10% of wages for the employer portion. Virginia keeps it simpler than many states with no state disability or paid leave taxes.
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Start with the profit and loss statement, balance sheet, and cash flow statement. Add accounts receivable and payable aging reports to track money coming in and going out. Monthly review catches problems while they're still small.
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Keep all sales invoices, exemption certificates, tax returns filed, and bank records that show how you calculated what you collected and remitted. Virginia requires you to hold these for at least three years, though four to six is safer.
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