How to Determine Where to Collect Sales Tax

TLDR: To stay compliant, you need to track your sales by state and determine if you’ve triggered physical or economic Nexus. Physical Nexus comes from inventory or offices in a state, while economic Nexus is triggered by revenue or transaction volume. Every state is different. doola helps you track, register, and stay compliant, so you can focus on growing your business.

Why Knowing Where to Collect Sales Tax Matters

One of the biggest challenges for e-commerce and online businesses is figuring out where they’re required to collect sales tax. Since sales tax is managed at the state level in the U.S., each state has its own rules and thresholds.

Missing just one state where you’re obligated to collect tax could lead to non-compliance, penalties, and backdated filings. That’s why it’s essential to track your sales carefully and understand where your business triggers sales tax Nexus.

How to Determine Where to Collect Sales Tax

Below is a step-by-step guide to help you determine where your business needs to collect sales tax.

Step 1: Track Your Sales by State

Every business should track gross revenue and transaction count by state. This data is key to determining whether you’ve hit any state’s economic threshold or have a physical presence there.

Some tools do this manually, while others (like doola) help automate the tracking so you never fall behind.

Step 2: Understand the Two Types of Nexus

Sales tax Nexus comes in two forms, and both are critical for determining your obligations:

Physical Nexus

You have physical Nexus in a state if you:

• Store inventory
• Have an office or warehouse
• Employ staff in the state

If any of these apply, you must register and collect sales tax there.

Economic Nexus

Even if you have no physical presence, you may have economic Nexus based on your sales performance.

Most states use thresholds such as:

• $100,000 in annual revenue, or
• 200 transactions per year

Surpassing either of these means you are legally required to collect and remit sales tax in that state.

Step 3: Verify Your Platform’s Coverage

Many founders assume that platforms like Amazon or Shopify automatically take care of all tax obligations. That’s not always the case.

For example:

• Amazon may handle sales tax under marketplace facilitator laws
• Shopify may not automatically register or remit taxes on your behalf

It’s crucial to double-check your obligations per channel—especially as you scale into multiple states or platforms.

How doola Helps You Stay Compliant

doola is built to support growing businesses with all things compliance, including sales tax.

Here’s how we help:

• Automatically identify where you have Nexus
• Track state thresholds and notify you when you need to register
• File and remit sales tax in each required state
• Ensure you’re compliant across Shopify, Amazon, and other channels
• Handle reseller certificates and filing deadlines

Instead of manually checking dozens of state laws, you can let doola manage compliance while you grow your business.

Book a Free Sales Tax Demo

Need help figuring out where you owe sales tax? doola offers free consultations and demos to walk you through your obligations—and how we can take it off your plate.

👉 Book a free demo with doola

FAQs

How do I know where to collect sales tax?

Track your sales by state. If you meet physical or economic Nexus thresholds, you’re required to collect and remit tax in that state.

What are economic Nexus thresholds?

Most states require tax collection after $100,000 in sales or 200 transactions in a calendar year, but thresholds vary.

Does Shopify collect sales tax for me?

Shopify helps calculate sales tax, but it doesn’t automatically register or file on your behalf. You’re responsible for making sure you’re compliant.

Can doola help me register in multiple states?

Yes. doola helps you identify where you need to register, handles paperwork, and files sales tax in each applicable state.