Whether your online business is a brand-new start-up or an established business who is expanding into the online marketplace, eCommerce sales tax is merely one of the many responsibilities an online business needs to be concerned with handling correctly. eCommerce sales tax used to be more straightforward but has become increasingly complex over time, particularly since 2018. Included in this guide is an introduction to the sales tax requirements for online retailers and answers to some frequently asked questions about eCommerce sales tax.

Do I Need To Charge eCommerce Sales Tax For My Online Business?

The simple answer is…maybe. Whether or not you should be collecting eCommerce sales tax on your online sales depends on two factors:

FACTOR #1: HAVE I ESTABLISHED SALES TAX NEXUS WITHIN A STATE?

How to determine whether you have established sales tax nexus within a state:

Between 1992 and 2018, the nationwide standard for whether a business had established sales tax nexus hinged on whether the business had a “physical presence” within a state. Things were relatively simple then. On June 21, 2018 in its South Dakota v. Wayfair, Inc. ruling, the U.S. Supreme Court overturned the 1992 Quill case that established that “physical presence” principle. We’ve written extensively on the Wayfair case (if you’d like to read more click here) because of the seismic shift in caused in the world of sales tax, but to summarize briefly here, the Wayfair case changed the sales tax nexus standard from “physical presence” to “economic presence.” Now, a business that has either a physical presence or a sufficient economic presence within a state has established sales tax nexus, and all the collection and reporting obligations that go along with that, within that state’s borders.
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