If you sell products online, you need a sales tax permit in every state where you have a taxable connection, called nexus, and that state charges sales tax. For most online sellers, that connection is triggered by crossing a sales threshold into a state (commonly $100,000 a year) or by having inventory or employees there. Five states have no statewide sales tax, so no permit is needed to sell into them. And if all your sales run through a large marketplace like Amazon or Etsy, the platform usually collects and remits the tax for you, which can eliminate the need to register on your own.
The rest comes down to figuring out which states you have nexus in, whether a marketplace is already handling collection, and what your product actually is.
What Creates Nexus for an Online Seller
Nexus is the connection between your business and a state that’s strong enough to create a tax obligation there. You can trigger it two ways, and online sellers routinely trip one without noticing.
Physical Presence
Physical nexus comes from a tangible footprint in a state: an office, a remote employee living there, a warehouse, or inventory stored there. The one that catches online sellers off guard is third-party fulfillment. If your goods sit in a fulfillment center that warehouses inventory across multiple states, you have physical nexus in each of those states, even if you’ve never visited.
Economic Activity
Economic nexus is based purely on how much you sell into a state, with no physical presence required. The Supreme Court opened this door in 2018 in South Dakota v. Wayfair, holding that states can require out-of-state sellers to collect sales tax when their economic activity in the state is large enough.1Supreme Court of the United States. South Dakota v. Wayfair, Inc. Every state with a sales tax has since set an economic nexus threshold.
The most common threshold is $100,000 in annual sales into the state. Some states set the bar higher: California and Texas each require $500,000, and New York requires $500,000 combined with at least 100 transactions. Roughly a third of states measure by dollar volume alone; the rest still use a sales figure plus a transaction count, and crossing either one is enough. Track your sales by state so you know when you cross a line.
States With No Sales Tax
You don’t need a sales tax permit to sell into Alaska, Delaware, Montana, New Hampshire, or Oregon, because none of them impose a statewide sales tax. A few Alaska localities levy local sales taxes, but there’s no state-level obligation to register.
When the Marketplace Collects for You
Every state with a sales tax has passed a marketplace facilitator law, which shifts collection responsibility from the individual seller to the platform.2Streamlined Sales Tax Governing Board. Marketplace Facilitator If you sell exclusively through Amazon, Etsy, eBay, Walmart Marketplace, or a similar site, the platform calculates, collects, and remits sales tax for you. In that case you generally don’t need your own permit for those sales.
The word doing the work there is “exclusively.” The moment you also sell through your own website, at craft fairs, or through any channel outside the marketplace, you have to track nexus in each state on your own sales. Cross a threshold and you need your own permit for the non-marketplace side of the business. Sellers who start on a marketplace and later launch a Shopify store commonly miss this.
Digital Products Sit in a Gray Area
If you sell ebooks, software downloads, online courses, or subscriptions rather than physical goods, taxability varies widely. Some states tax digital products the same as physical goods, some exempt them entirely, and others tax certain digital products but not others depending on whether the buyer gets permanent access or a subscription, and whether the customer is a consumer or a business.
Twenty-three states in the Streamlined Sales and Use Tax Agreement use standardized definitions for “specified digital products” covering digital audio, video, and books, though each member state still decides on its own whether to tax those categories. Before you can figure out where you need a permit for digital goods, you have to figure out which states treat your specific product as taxable at all.
How to Register Once You Know You Need To
Registration happens through each state’s department of revenue website. Most applications are fully online and take under 30 minutes per state. Some states issue a permit number immediately; others take days or weeks. More than 40 states issue permits for free. Among those that charge, the fees are modest, with Connecticut the outlier at $100 and a possible bond requirement. States call the document different names, including sales tax permit, seller’s permit, vendor’s license, and retail license, but they all authorize the same thing: collecting sales tax.
Expect to provide the same core information almost everywhere:
- Your Federal Employer Identification Number, or your Social Security Number if you’re a sole proprietor without an EIN.3Internal Revenue Service. Get an Employer Identification Number
- Legal business name, any DBA, and your business structure.
- Names and personal addresses of owners or corporate officers.
- Business address, phone, and website.
- Your NAICS industry code.
- The date you began or expect to begin sales in that state.
If you have nexus in several states, the Streamlined Sales Tax Registration System lets you register in any of its 23 member states through a single free online application.4Streamlined Sales Tax Governing Board. Sales Tax Registration SSTRS You still file returns with each state separately, but you skip filling out 23 separate applications. For states outside that group, register directly on each state’s revenue department site.
What Happens If You Skip Registration
Selling into a state where you have nexus without a permit means you were supposed to be collecting sales tax and weren’t. If a state finds out through an audit, it will assess you for the uncollected back taxes, and in most states you owe that amount whether or not you actually collected it from customers. The tax comes out of your margin.
On top of the back taxes, expect penalties and interest. Late-filing and late-payment penalties in most states fall between 5% and 25% of the unpaid tax, with some states imposing minimum penalties of $50 per missed filing period. Interest runs from the original due date. For sellers who ignored nexus for years, the combined bill can easily outrun the profits from the sales themselves. Every state with a sales tax also has criminal provisions for willful evasion, typically misdemeanor charges with fines and, in extreme cases, imprisonment. Criminal prosecution is rare for sellers who simply misunderstood nexus, but the risk exists for anyone deliberately avoiding registration.
Voluntary Disclosure If You’re Already Behind
If you realize you should have been registered somewhere and weren’t, a voluntary disclosure agreement is usually the cheapest way out. You come forward, agree to register and start collecting, and file back returns for a limited window. In exchange, states typically waive penalties and cap the lookback at three or four years instead of assessing the full period of noncompliance.
The Multistate Tax Commission runs a centralized voluntary disclosure program that lets you negotiate with multiple states at once, and you can apply anonymously through a tax advisor or attorney until terms are agreed.5Multistate Tax Commission. Multistate Voluntary Disclosure Program The catch: you’re only eligible if the state hasn’t already contacted you about an audit. Once the state reaches out first, the window closes. Interest on back taxes is still owed, but the penalty relief and shorter lookback make voluntary disclosure significantly cheaper than waiting to be caught.