READ YOUR BUSINESS SERIES | A Monthly Financial Guide for E-Commerce Entrepreneurs |  Article 4 of 5

Of all the reports in this series, the Sales Tax Liability Report is probably the one that causes the most anxiety for e-commerce sellers. And honestly? That makes sense. Sales tax rules for online businesses are genuinely complex — they vary by state, by product type, by sales channel, and they have changed significantly over the last several years.

But complexity is not a reason to avoid this report. It is exactly the reason to get familiar with it. Because the sellers who review their sales tax picture every month are the ones who stay ahead of it — quietly and without stress. The ones who avoid it tend to find out about a problem at the worst possible time.

This article is not meant to make sales tax feel scary. It is meant to make it feel manageable. Let’s walk through what this report shows, what has changed in recent years, and what to look for each month so that sales tax becomes just another routine part of your financial review — not a source of dread.

A Little Context: How Sales Tax for E-Commerce Changed

For a long time, online sellers only had to collect sales tax in states where they had a physical presence — a warehouse, an office, employees. If you sold to a customer in another state and had no physical connection there, sales tax was generally not your concern.

That changed in 2018, when the Supreme Court’s South Dakota v. Wayfair decision gave states the authority to require online sellers to collect sales tax based on their sales volume alone — even without any physical presence in the state. This is called economic nexus.

Now, nearly every state has economic nexus laws in place . Most use a threshold of $100,000 in sales or 200 transactions in a calendar year as the trigger. Cross that threshold in a state, and you are generally required to register, collect, and remit sales tax there — even if you have never set foot in it.

Worth knowing: The 200-transaction threshold has been eliminated in several states in recent years, 15 as of July 2025. Some states now look at sales volume only. Thresholds and rules do change, so it is worth reviewing your nexus status at least once a year — or whenever your business grows significantly into a new market.

What the Sales Tax Liability Report Shows

Your Sales Tax Liability Report is a monthly summary of the sales tax your business has collected across all channels and states — and what you owe to each state as a result.

When it is set up and reviewed correctly, it gives you a clear picture of three things:

• Where you have nexus: Which states you are registered in and actively collecting sales tax for, based on your sales volume and business activity.
• What you collected: The total sales tax collected from customers in each state during the month.
• What you owe and when: Filing deadlines vary by state — some require monthly filings, others quarterly or annual. This report helps you stay on top of what is due and when.

What to Check Every Month

1. Your Sales Volume by State

Each month, take a look at where your customers are located and how your sales volume is trending in each state. If you are approaching the economic nexus threshold in a state you are not yet registered in, that is something to flag early.

Growing into a new state is a good thing. You just want the compliance side to keep pace with the growth.

2. Collected vs. Owed

Are you collecting the correct rate in every state where you have nexus? Sales tax rates are not static — states and local jurisdictions update them regularly. Some products are also taxed differently depending on the state. Apparel, supplements, and digital products are common categories where rates and rules vary significantly.

If your sales tax software is not keeping up with rate changes automatically, this is the month-end check that catches discrepancies before they compound.

3. Filing Deadlines

Missing a sales tax filing deadline results in automatic penalties in most states — even if you collected the right amount and have the money ready to remit. Each state sets its own schedule based on your sales volume. Higher-volume sellers often file monthly; lower-volume sellers may qualify for quarterly or annual filing. Your Sales Tax Liability Report should make it easy to see what is due in the coming weeks so nothing slips through.

4. The Marketplace Facilitator Distinction

This is one of the most important things to understand about sales tax as an e-commerce seller: In most states, marketplaces like Amazon are required to collect and remit sales tax on your behalf under marketplace facilitator laws. That is genuinely helpful — it takes a significant piece of the compliance burden off your plate for your Amazon channel.

However, it does not cover everything. Your own website sales, Etsy sales (depending on the state and your setup), and any other direct channels can still be your responsibility. A common gap we see is sellers who assume Amazon’s coverage extends to all their channels — and then discover they have uncollected and un-remitted sales tax building up somewhere else.

A helpful way to think about it: Amazon handles the sales tax for what happens on Amazon. Everything outside of Amazon is yours to manage. If you sell on Shopify, your own site, or any other platform, make sure you have nexus tracking and collection set up there separately.

Tools That Make This Much Easier

Sales tax compliance across multiple states is genuinely complex to manage manually — which is why most e-commerce sellers who take it seriously use dedicated software to handle the calculation, tracking, and filing.

TaxJar and Avalara are the two most widely used platforms for e-commerce sellers. Both integrate with Amazon, Shopify, Etsy, and other major channels, and they handle rate calculations automatically as rules change.

The goal is to get to a place where your reporting is automated, your nexus thresholds are monitored, and your filings are predictable — not reactive.

A Note on Collected but Un-remitted Sales Tax

One thing worth keeping in mind as you review this report: sales tax you have collected from customers is not your money. It passed through your business on its way to the state. It sits on your balance sheet as a liability — and remitting it on time is a compliance requirement, not optional.

This is not said to add pressure. It is said because understanding this distinction helps you avoid a common mistake — treating collected sales tax as available cash during a tight month. Keeping that liability clearly visible in your monthly reports makes it much easier to remember that it has a destination.

Getting Started This Month

If you have not yet set up formal sales tax tracking, here is a simple starting point:

• Start by reviewing your sales by state over the past 12 months
• Check whether you are approaching or have crossed the economic nexus threshold in any state where you are not yet registered.
• If you are using TaxJar, Avalara, or a similar tool, pull your monthly liability report and confirm the amounts collected match what is recorded in your accounting software.
• Confirm that any sales through Amazon FBA are being handled by Amazon’s marketplace facilitator collection, and that your non-Amazon channels have collection set up separately.
• Note any filing deadlines coming up in the next 30 days.

If you are not sure where your business stands on nexus, that is a great conversation to have with a tax advisor who works with e-commerce sellers. It is much easier to get ahead of this than to untangle it after the fact — and a quick review can give you a lot of clarity.

You Do Not Have to Figure This Out Alone

If you are unsure where your business stands from a sales tax perspective, it can be helpful to walk through your nexus exposure and current setup with an advisor.

We regularly work with e-commerce sellers to help them understand their obligations and what a clean, scalable setup looks like.

If you would like a second set of eyes on your current approach, we are always happy to have that conversation.

Coming Up Next

In Article 5 — the final article in the Read Your Business series — we are covering the Platform Reconciliation Report. This is the report almost no one runs, and the one that catches the most errors. If you sell on more than one channel, or if you have ever noticed that your bank deposits do not quite match your sales numbers, this one is going to be very useful.

Questions about your sales tax setup or want to know where your business stands on nexus? Tall Oak Advisors is here to help — reach out any time.