Hi there. I'm Katherine Taylor, The Lawyer for Business Owners.

I've already done a couple of videos on sales tax — very boring, but very important. In this video, I want to take a step back and explain the overall factors any state might use to determine whether a company that sells goods or services into that state is subject to sales tax there. One important thing to understand: sales tax is governed by state law. So even if your company is located in one state, if you're selling into another — whether it's across the country or next door — you may be required to comply with that state's sales tax laws. This video summarizes the common factors states use to decide whether a business is subject to their sales tax laws.

1. Physical Presence

The biggest factor is physical presence in a state. Let's take CVS as an example. I don't know where it's headquartered — maybe Iowa — but it has brick-and-mortar locations in many states. That physical presence makes CVS subject to sales tax in those states. But physical presence isn't limited to retail stores. If your company stores inventory, uses fulfillment centers, or has representatives traveling into a state to market your products or services, that could create a taxable presence — even if no direct sales happen in person.

2. Economic Nexus

The next big factor is what's called economic nexus. Economic nexus means that if you sell enough goods or services in a state, you may be required to collect sales tax — even if you have no physical presence there. After the Wayfair decision by the U.S. Supreme Court in 2018, many states enacted laws that tax out-of-state sellers based purely on sales volume. Thresholds vary by state — some are as low as $10,000, others as high as $500,000. That's why it's critical to review the specific sales tax statutes in the states you sell into.

3. Marketplace Sellers

Finally, many states now require marketplaces like Etsy, Shopify, and Amazon to collect and remit sales tax on behalf of third-party sellers. If your business sells through one of these platforms, you may be required — or the platform may be required — to collect sales tax in certain states. There's a lot to navigate here — and we can help. We've reviewed the statutes in many states and can guide you through your obligations.

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Thank you!