Key Takeaways
- Amazon, eBay, and Etsy are marketplace facilitators. They collect and remit sales tax for you in most states, but you may still need to register.
- Shopify is not a marketplace. If you sell direct on Shopify, you’re responsible for collecting and remitting sales tax in every state where you have nexus.
- Nexus can be physical (office, inventory, employees) or economic (sales over state thresholds, usually ~$100K or 200 transactions).
- NY requires sales tax collection on taxable sales made to NY residents once you cross NY’s economic nexus threshold. The current economic nexus threshold in New York for remote sellers requires both a sales and a transaction test to be met. Specifically, a business must have more than $500,000 in gross receipts from sales of tangible personal property delivered into New York and more than 100 separate transactions in the state during the preceding four sales tax quarters.
Amazon and eBay Sellers: Marketplace Facilitator Rules
If you sell on Amazon, eBay, Etsy, or Walmart Marketplace, the platform is usually treated as the marketplace facilitator. In most states, the marketplace collects and remits sales tax on behalf of all sellers on their platform. That simplifies life for you.
What you still need to do:
- Register in states where required. Some states require marketplace sellers to register even though the marketplace collects.
- Track your own non-marketplace sales. If you also sell direct on Shopify or your own site, those sales are on you.
- Know the facilitator coverage. Not every state has marketplace facilitator laws yet, and the rules vary. Alaska, Delaware, Montana, New Hampshire, and Oregon currently don’t have marketplace facilitator laws.
Shopify Sellers: You’re on the Hook
Shopify is a tool, not a marketplace. The nexus and collection obligation sits entirely with you.
If you sell on Shopify to customers in multiple states, here’s what you need:
- Pull your Shopify sales report by shipping state for the past 12 months.
- Flag any state where you’re over $100K in sales or 200 transactions.
- Register for a sales tax permit in each flagged state.
- Configure Shopify to collect tax in those states.
- Remit monthly, quarterly, or annually per that state’s schedule.
If You’re Behind
Most Shopify sellers are. Here’s the rule we give our clients: come to them before they come to you.
It’s much more beneficial for a taxpayer to clean up their back taxes before they get a notice from the IRS or a state or city. If you come to them before they come to you, the chances of getting penalties waived are much, much, much greater. If you already get a bill or a lien or a levy, it’s much harder to get penalties abated.
Most states have voluntary disclosure programs. You come forward, they waive the penalties (usually), you pay the actual tax plus interest, and you’re clean going forward.
New York State Rules
New York requires remote sellers to register and collect sales tax if they exceed $500,000 in sales and 100 transactions into the state over the prior four quarters. Both thresholds must be met. Once triggered, the seller must register for a Certificate of Authority and begin collecting and filing. 2. Marketplace facilitators (e.g., Amazon, Etsy) collect and remit sales tax on behalf of sellers for facilitated transactions. However, sellers may still need to register and file in New York if they independently meet nexus thresholds, as marketplace sales count toward the threshold. This often creates a filing requirement even when tax is already being collected. 3. Shopify does not determine nexus, so businesses must monitor thresholds and manually enable New York tax collection once required. Sales tax should be set up using destination-based sourcing to apply the correct combined state and local rates. Proper product taxability settings are also critical, as not all items and services are taxable in New York. 4. New York City does not have a separate sales tax system but adds a local rate on top of the state, resulting in a combined rate of 8.875%. Sales tax is administered by New York State, but businesses must apply the correct local rate based on the customer’s location. NYC tax exposure also includes separate income-based taxes (e.g., UBT), which are distinct from sales tax obligations.
Frequently Asked Questions
Do Shopify sellers pay sales tax in NY?
Yes, if you have physical nexus in NY (living there, inventory in a NY warehouse, employees there) or economic nexus (sales to NY customers over the threshold). Shopify does not collect for you. You register, collect from NY customers, and remit.
Does Amazon handle sales tax for sellers?
In most states, yes. Amazon is a marketplace facilitator and collects and remits sales tax on behalf of all sellers on the platform. A handful of states still require seller registration even with marketplace facilitator laws.
When do I need to start collecting sales tax?
The moment you cross the economic nexus threshold in a state (usually ~$100K in sales or 200 transactions per year) or establish physical nexus (inventory, office, employees). Register first, then start collecting.
Case Story: Miami Online Retail Entrepreneur (Amazon Seller)
The situation: Single mom in Miami with a booming online retail business (cell phone accessories, sold via Amazon and Overstock, sales in the millions). Because she sold primarily via marketplace facilitators (Amazon and Overstock), those platforms handled sales tax collection for her. Anil focused her on the bigger picture: retirement, life insurance, protecting her kids.
What Anil did: Confirmed marketplace facilitator sales tax coverage. Then built out her retirement (VUL + SEP IRA), hired her kids as employees with Roth IRAs.
Outcome: Sales tax handled automatically by the marketplaces. Anil freed her up to focus on the wealth and family protection plan.
→ Watch the full story on the Taxless Show
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