Summary of What This Blog Covers:
- Explains how online businesses trigger sales tax obligations through physical, economic, affiliate, or marketplace nexus, and why selling digital products or services may require tax collection in multiple states even if you don’t have a physical presence there.
- Clarifies common misconceptions about sales tax compliance, including the limited roles of platforms like Shopify and Amazon, and why relying on these platforms alone can leave business owners vulnerable to back taxes, penalties, or audits.
- Outlines the risks of ignoring sales tax such as interest, state audits, and delayed financing or exits—emphasizing the need for proactive compliance, especially as states increase enforcement through 1099-K tracking and digital sales data.
- Details how Insogna CPA helps online entrepreneurs stay compliant, from identifying sales tax nexus and registering with states to setting up platforms, filing returns, and integrating sales tax with broader business strategy and tax planning.
If you’re building an online business, you already wear a dozen hats: founder, marketer, content creator, maybe even your own customer service rep. But one hat you probably didn’t expect to wear?
Sales tax compliance specialist.
It sneaks up on even the savviest entrepreneurs. Maybe you’re selling digital products, coaching packages, or physical goods. You’ve mastered funnels, social media, and even QuickBooks. But sales tax? That feels like an entirely different universe.
If you’ve ever asked:
- “Do I even need to collect sales tax if I’m fully online?”
- “Doesn’t Shopify or Amazon handle this?”
- “Why is a state I’ve never visited asking me to file a sales tax return?”
You’re not alone. At Insogna CPA, a trusted CPA firm in Austin, Texas, we work with online entrepreneurs across industries from coaches and course creators to ecommerce brands and service providers. We help clients decode their sales tax responsibilities, avoid penalties, and build stress-free systems that grow with them.
Let’s dig into what you really need to know about online sales tax: what triggers it, what happens if you ignore it, and how to get ahead of it without getting lost in the details.
Why Sales Tax Is No Longer Just a “Retail Problem”
Ten years ago, sales tax was relatively simple: you paid it at the store, and if you ran a physical shop, you collected it from customers in your state.
But everything changed in 2018.
That year, the U.S. Supreme Court ruled in South Dakota v. Wayfair, Inc. that states could require out-of-state sellers to collect sales tax if they met certain economic thresholds even if those sellers had no physical presence in the state.
This ruling created the concept of economic nexus—a legal obligation to collect and remit sales tax based purely on your sales volume or transaction count in a state.
So what does that mean for you?
If you sell goods or services online (even digital ones), you may be legally required to collect and remit sales tax in multiple states, regardless of where you live or run your business.
And unfortunately, “I didn’t know” isn’t a defense tax agencies accept.
Sales Tax Nexus: The Rules That Trigger Tax Obligations in Multiple States
Let’s talk about the most important term you need to understand when it comes to sales tax: nexus.
Nexus means you have a sufficient connection to a state that requires you to collect and remit sales tax there. There are several types of nexus that matter for online business owners:
1. Physical Nexus
This applies if you:
- Have inventory stored in a state (including at a third-party warehouse like Amazon FBA)
- Have a business office or remote employee in a state
- Have equipment, trade show presence, or any physical footprint in that state
Even if you don’t live in the state, having physical operations there creates nexus.
2. Economic Nexus
This is the big one for digital businesses.
Most states now require you to collect sales tax if you make over $100,000 in sales or conduct 200+ transactions in a year with customers in their state. This means if you sell low-ticket items like $25 digital downloads or $50 courses, you can hit that 200-transaction threshold faster than you’d expect.
And it’s not just product sales. Some states tax services like online coaching, memberships, and webinars. This is where a qualified CPA in Austin, Texas can analyze your offerings and determine where you’re exposed.
3. Affiliate Nexus
If someone in another state promotes your product as an affiliate and earns commission, some states consider that a business connection (aka nexus) and require you to collect and file sales tax there.
4. Marketplace Facilitator Laws
This applies if you sell on platforms like Amazon, Etsy, or Walmart. These platforms are required by law to collect sales tax on your behalf in many states. But here’s the catch: you may still have to file a return in that state to report those sales, even if you didn’t directly collect the tax.
Confused yet? That’s exactly why many business owners search for a tax preparer near them, only to discover most tax preparers aren’t equipped to handle multi-state digital sales. You need someone who’s done this before and that’s what we do at Insogna CPA.
Digital Products and Sales Tax: It’s Complicated
If you’re selling digital products like eBooks, software, courses, audio files, or templates, don’t assume you’re exempt from sales tax.
In some states, digital products are fully taxable. In others, they’re exempt. Some tax them only if they’re “automated” but not if they include live support. And a few states have no sales tax at all (looking at you, Oregon, New Hampshire, Montana, Delaware, and Alaska).
Here’s what makes it tricky:
- Your platform may not be set up to categorize your products correctly.
- Rules change frequently. What’s tax-exempt in Florida this year could be taxable next year.
- Bundled products (like a course + downloadables) may be taxed differently than standalone items.
A certified public accountant near you who specializes in digital sales can help you track state-specific taxability, configure your ecommerce setup, and avoid misclassifying your products.
What Happens If You Ignore Sales Tax?
Short answer: nothing good.
Long answer: States are aggressively enforcing sales tax collection rules, and they’re leveraging data from 1099-K forms, payment processors, and marketplaces to identify businesses with unregistered nexus.
If you’re not collecting where you should be:
- You may owe back taxes, interest, and penalties
- You could face an audit and be required to show records of sales and tax collection
- It could delay a business loan, funding round, or exit opportunity if your books don’t show compliance
And no, using Shopify or Stripe alone won’t protect you. Those platforms don’t file your sales tax returns, monitor your nexus exposure, or register you with state tax departments.
That’s your responsibility or your accountant’s.
Which brings us to…
How Insogna CPA Helps You Stay Compliant (Without Losing Sleep)
We’re not your average tax preparation service near you. At Insogna CPA, we specialize in helping online business owners build strong, scalable financial foundations including sales tax compliance.
Here’s what we offer:
1. Nexus Analysis
We evaluate where you have nexus based on transaction data, economic thresholds, affiliate activity, and platform use.
2. State Registration
We register you in only the states where you actually need to be compliant. No overkill. No guesswork.
3. Platform Setup
We help configure your tax settings in Shopify, WooCommerce, Stripe, Teachable, or wherever you sell so you’re collecting the right amount from the right people in the right states.
4. Filing & Maintenance
We file your sales tax returns across states, track deadlines, and ensure ongoing compliance. No more surprise letters or late fees.
5. Strategic Tax Planning
We combine sales tax insights with your overall strategy whether you’re planning an expansion, launching a new offer, or trying to optimize your deductions. Our team includes licensed CPAs, enrolled agents, and tax advisors in Austin who know exactly how to support your growth.
Other Tax Considerations for Online Business Owners
While sales tax is critical, it’s only one part of the picture. Here are a few other areas where we support digital entrepreneurs:
- Self-employment tax planning and estimated quarterly payments
- 1099 NEC and W9 tax form support for contractors and affiliate payouts
- 1099-K reporting from Stripe, PayPal, or marketplaces
- FBAR filing and foreign income compliance if you have international vendors or accounts
- Entity structuring to help reduce your tax burden as you grow
We work with you to develop a holistic plan because running a profitable online business isn’t just about making money. It’s about keeping it.
The Bottom Line: Don’t Wait for a Sales Tax Crisis to Take Action
You don’t need to master every tax rule. But you do need to know where you’re vulnerable and who can help.
At Insogna CPA, we help online entrepreneurs:
- Get clarity on their sales tax obligations
- Automate their compliance
- Minimize tax exposure
- And focus on growing their businesses with confidence
Whether you’re selling products, subscriptions, coaching, or digital content, our expert team is here to help you stay one step ahead.
Ready to Get Clear on Your Sales Tax Obligations?
Stop guessing. Stop Googling.
Work with a CPA team that understands the complexity of online business and knows how to keep you compliant, profitable, and prepared.
Schedule your free consultation today with Insogna CPA and get a tailored sales tax strategy for your business. Whether you’re looking for a small business CPA in Austin, a tax consultant near you, or a certified CPA near you who knows the ecommerce and digital landscape, we’ve got you covered.
Let’s take the mystery out of sales tax. And while we’re at it, let’s put more money back in your pocket.