How to Handle Sales Tax on TikTok Shop and Instagram Shopping

A Reddit user let loose on what can only be described as the modern e-commerce seller’s existential crisis: trying to figure out who the heck is responsible for sales tax on TikTok Shop and Instagram shopping.

Here are his exact words:

“TikTok says contact Shopify. Shopify says contact TikTok. I just cannot understand how brands doing millions a month via TikTok Shop are dealing with their sales tax.”

If you’re selling on TikTok or Instagram Shop, you’d probably relate to his situation very well. Sales tax is one of the messiest parts of running a shop online for many reasons. 

For example, TikTok Shop doesn’t always collect or pass along sales tax data the way your accountant or tax software needs.

And platforms like Shopify, often won’t sync that data properly unless you’ve configured things manually. 

What does that mean for you? 

Confusing gaps in your reports, missed filings, and customer support teams that keep bouncing you between platforms like it’s a game of tag.

No automation. No clean integration. No accountability. 

And, the burden of compliance is falling entirely on you. It’s QUITE frustrating. But you don’t have to fumble through it all alone.

In this guide, we’ll break down:

• When TikTok and Instagram do collect sales tax for you, and when they don’t

• How to track and report sales tax manually if needed

• Tools and services that can help simplify the process (even if the platforms don’t)

Why Sales Tax Matters for Social Commerce Sellers

These days, TikTok and Instagram have made it ridiculously easy to sell products. But when it comes to sales tax compliance? You’re pretty much on your own! 

And that’s a problem.

Because the moment you make a sale, especially across state lines, you may owe sales tax depending on where your customer is located and how much you’ve sold in that state.

That’s called economic nexus, and it’s triggered faster than most sellers realize.

What Platforms Actually Handle (And What They Don’t)

Here’s what’s true as of now:

TikTok Shop claims to collect and remit sales tax for sellers in certain states where it is deemed a Marketplace Facilitator (MPF).

However, this doesn’t cover all states, and your responsibilities don’t end there. TikTok doesn’t consistently pass sales tax data to CPAs or third-party software, leaving gaps in compliance.  

Instagram Shopping is tied to Meta’s Commerce Manager, and if you use Checkout on Instagram, Meta may collect and remit taxes on your behalf for eligible orders.

But if you’re redirecting traffic to Shopify or another website, you must set up tax collection manually on your store.

Here’s why sales tax matters for social commerce sellers:

👉🏼 You could be legally liable: If TikTok or Instagram isn’t collecting sales tax on your behalf (or isn’t doing it correctly), you could be on the hook for uncollected tax.

And, it could mean thousands in fines or back payments.

👉🏼 Platform support won’t help: As you’ve probably learned by now, TikTok and Shopify just keep pointing fingers at each other. Neither is taking ownership, and their support teams usually don’t understand sales tax compliance beyond canned responses.

👉🏼 Your CPA isn’t a mind reader: If sales tax data isn’t being passed through correctly, or not passed at all. Your accountant can’t help you stay compliant. That’s how businesses get flagged.

👉🏼 It’s part of building a real brand: If you want your TikTok or Instagram shop to be more than a quick trend, you need to sort out sales tax early. It might sound boring, but skipping it now could cost you big later, with penalties, messy audits, and way more stress. Getting it right from the start saves you time, money, and a whole lot of headaches.

Understanding Sales Tax Nexus in the Context of Social Selling

In the simplest terms, nexus means connection. 

If your business has a connection to a state, based on how much you sell there or where you’re physically doing business, that state can legally require you to collect and pay sales tax on every sale made to customers in that state.

So, when we say “sales tax nexus,” we’re asking:

Have you crossed the line where a state can now expect you to handle sales tax obligations there?

Now, how does this apply to social sellers?

If you’re selling on TikTok Shop, Instagram Shopping, or through Shopify linked to your socials, you’re technically running an e-commerce business.

And because you’re probably shipping across multiple states, you need to know where you’ve triggered nexus, because that’s where tax rules kick in.

There are two main types of nexus to care about:

Physical Nexus

Physical nexus means you have a tangible presence in a state.

That could be as simple as living there, storing your inventory in a warehouse or with a fulfillment partner located in that state, or hiring people, like contractors or employees, who work from that location.

If any of those apply to you, you likely have a physical nexus in that state, which means you’re legally required to collect and file sales tax for sales made to customers there.

Economic Nexus

This is the one that sneaks up on social sellers. It’s based on how much business you’re doing in a state, not where you live. Each state sets its own threshold, but common ones are:

• $100,000 in annual sales, or

• 200 individual transactions in that state in a year

So, if your viral product hits 200 orders in Florida in 3 months? You’ve got nexus in Florida, even if you live in California.

And that means you now owe Florida sales tax unless TikTok or Meta is handling it (which, they often aren’t doing properly).

How TikTok Shop Handles Sales Tax (and What Sellers Must Know)

If you’re selling on TikTok Shop, here’s a hard truth that too many sellers find out after tax season:

Just because TikTok collects sales tax, doesn’t mean you’re no longer liable.

Let’s dive deeper.

What TikTok Actually Does

TikTok is classified as a Marketplace Facilitator in the U.S. 

That means:

For orders placed directly through TikTok Shop, TikTok automatically calculates, collects, and remits sales tax to the appropriate states, but only for certain states where marketplace laws require it.

So, if a customer in California buys from your TikTok Shop, TikTok may handle sales tax for that transaction if California law says marketplace facilitators must do so.

But, not all states treat TikTok the same, and TikTok doesn’t give your CPA the clean, itemized breakdown they actually need for full tax compliance.

So, you still have responsibilities.

What Sellers Often Get Wrong

Let’s clear up some common myths.

❌ TikTok handles all tax stuff

TikTok only handles sales tax on its own platform, and even then, only in states where it’s required to.

You still owe income tax, and you’re still responsible for tax on orders made via your own website, Instagram DMs, or Shopify checkout.

❌ If TikTok collects tax, I don’t need to track anything

False. You still need to monitor where you’ve hit economic nexus, especially if you’re selling on multiple platforms.

TikTok’s dashboard doesn’t alert you when you cross thresholds in a new state. You have to track that manually.

❌ I don’t need to register for a sales tax permit anywhere

If TikTok isn’t collecting in a state, or if you’re also selling through another channel (like Shopify), you may need to register for a sales tax permit in that state to stay compliant.

The Reality: What TikTok Covers vs. What You’re Still Responsible For

How Instagram Shopping Deals with Sales Tax Compliance

If you’re selling on Instagram, you’ve probably noticed that it feels… a little different from selling on TikTok. Especially when it comes to taxes.

Let’s clear the fog. Here’s how Meta (Instagram’s parent company) handles sales tax, and what you should know about it.

Understanding Meta’s Tax Role (and Where It Ends)

Meta acts as a Marketplace Facilitator when buyers use Checkout on Instagram, the native checkout flow where customers purchase directly inside the app. 

In that case, Meta is legally required (in most U.S. states) to calculate, collect, and remit sales tax on your behalf.

So, if a customer taps “Buy Now” and completes the purchase inside Instagram, Meta’s got the sales tax covered.

Does it make sense?

Here’s where it gets tricky. Pay close attention to this part!

Not all sellers use Instagram Checkout. Many of you send customers to your website, Shopify store, or use link-in-bio tools to close a sale, right?

And when that happens?

Meta’s role ends when it comes to taxes. Your responsibility begins from there.

If a sale takes place outside Instagram’s native checkout flow, you need to calculate, collect, and remit sales tax.

👉 Meta = marketplace facilitator only when Instagram Checkout is used.

👉 You = responsible for tax on any off-platform sales.

Source: Meta Business Help Center – Sales Tax Info

Top 3 Tax Setup Mistakes on Instagram

Let’s talk about where things usually go wrong:

• Assuming Meta collects sales tax for every sale: If you’re using your own website for checkout, Meta is not responsible. This is a common trap for sellers who assume listing a product through Commerce Manager = full tax compliance.

• Not verifying tax categories in Commerce Manager: Meta uses these categories to determine tax rates. If your product is mislabeled, the wrong rate may be charged, or no tax at all. And guess who’s on the hook if it’s wrong? You.

• Ignoring sales tax obligations from external sales channels: Instagram might collect tax on some in-app purchases, but what about the 100 orders you got through Shopify that week? If you’re not tracking nexus and registering in states where you’ve hit thresholds, you’re out of compliance.

Tools and Strategies for Managing Multi-State Sales Tax Efficiently

In this section, we’ll walk you through what we call the “Sales Tax Survival Plan” for solopreneurs and small teams. Let’s get started.

Step-by-Step Guide to Registering in Multiple States

• Determine Where You Have Nexus: Review your sales data to identify states where your business activities have established nexus.

• Gather Necessary Information: Prepare essential business details, including your EIN, business address, and ownership information.

• Register with State Tax Authorities: Visit the official Department of Revenue website for each state where you have nexus to complete the registration process.

• Maintain Compliance: After registration, ensure timely filing and remittance of sales tax as per each state’s requirements.

Advice for Solopreneurs and Small Teams

💡 Automate Where Possible: Utilize sales tax compliance software like doola to automate calculations, filings, and remittances.

💡 Stay Informed: Regularly review state-specific tax laws and thresholds to ensure ongoing compliance.

💡 Consult Professionals: Engage with tax professionals or consultants to navigate complex multi-state tax obligations effectively.

How doola Helps You Stay Sales Tax Compliant (Without the Stress)

Sales tax compliance shouldn’t require coaching or webinars in every state’s tax code.

That’s exactly why we built doola, to take the chaos out of sales tax compliance and help founders like you stay legally sound.

Whether you sell on TikTok Shop, Instagram Shopping, Amazon, or Shopify, here’s how doola keeps things simple, accurate, and stress-free.

Here’s what we do for you:

• Register your business for sales tax in your primary state (and help with reseller certificates if needed)

• Track your compliance status across channels, whether you’re scaling on Shopify or blowing up on TikTok

• File your sales tax accurately and on time, so you don’t rack up penalties

Book a free demo today and see how doola can take sales tax compliance, and stress, off your plate.

FAQs About Sales Tax on TikTok Shop and Instagram Shopping

Do TikTok and Instagram automatically collect sales tax for me?

TikTok collects and remits sales tax in some states as a Marketplace Facilitator, but not all.

Instagram only handles sales tax if you’re using their in-app Checkout feature. If you’re directing customers to your own site, you’re responsible.

What triggers a sales tax obligation when I sell through social platforms?

You’re obligated to collect sales tax when you hit economic nexus, usually $100K in sales or 200 transactions in a state. This can happen quickly with viral products or high-volume sales.

Which states should I register in if I sell via TikTok or Instagram?

You should register in states where you’ve established nexus based on your sales volume or physical presence. Review your order data to identify which states cross the threshold.

Can I use one sales tax tool across both platforms?

Yes. Tools like doola, can sync sales across platforms and help you track, file, and stay sales tax compliant in multiple states.

What penalties can I face if I don’t collect or remit sales tax?

You could face back taxes, late fees, interest, and in some cases, audits or business license suspension. Some states charge penalties of 10–25% of uncollected tax, plus interest.