Nexus is the word tax authorities use for the connection between a business and a jurisdiction that obliges the business to register, collect and remit tax there. Sellers tend to meet the concept late, usually when a marketplace sends a notice or an accountant asks an awkward question. By then the exposure has been building for months, because the obligation starts when a threshold is crossed, not when someone tells you about it.
The two things that catch ecommerce businesses are that thresholds are measured in more than one way, and that selling through a marketplace does not remove your own obligations everywhere. Both are manageable once you know which numbers to watch.
Economic Nexus: The Threshold That Matters Now
Physical presence used to be the trigger: a warehouse, an office, staff. Modern rules add economic nexus, which is reached purely by selling into a jurisdiction. A state or country sets a revenue figure or a transaction count, and once a seller exceeds it in a defined period, registration follows.
Two features make this harder than it looks. Thresholds are measured differently – some jurisdictions count gross sales, some count taxable sales, some count transactions, and the measurement window is not always the calendar year. And the threshold applies to sales into that jurisdiction, not to sales by a legal entity registered there, so a business operating from a single location can hold registrations in many places.
Marketplace sales complicate the count. In many regimes, sales made through a platform that is registered as a marketplace facilitator are counted toward the seller’s threshold even though the platform remits the tax. That means a store can cross a threshold purely on facilitated sales and still owe registration and filing obligations, including zero-tax returns.
Marketplace Facilitator Rules: What Shifts and What Does Not
A facilitator rule moves the collection and remittance duty from the seller to the platform for sales made through that platform. It is a genuine simplification for the marketplace channel. It does nothing for three other situations: sales on your own storefront, sales on a platform that is not registered as a facilitator in that jurisdiction, and sales where the platform collects but the seller remains liable for filing.
So the practical model is per-channel, not per-business. For each jurisdiction, ask: did I sell through a facilitator, through my own site, or both? The answer determines whether you file a return showing tax collected by someone else, a return showing tax you collected, or both.
What to Track From Day One
Everything downstream is easier if the data is captured as sales happen rather than reconstructed later. Two reports, run monthly, cover most of the need:
- Sales by destination jurisdiction with channel split, so each jurisdiction shows total, marketplace-facilitated, and direct amounts.
- Tax collected by channel, so amounts remitted by a platform can be reconciled against amounts you remitted.
Add a review cadence: when any jurisdiction approaches a threshold, decide in advance whether to register, or to stop selling into it. Deciding after the threshold is crossed means back filings and, in some places, penalties on tax that should have been collected but was not.
Technical Background
Sales tax in the United States is a destination-based consumption levy collected by the seller, which is why sales tax obligations attach to where the buyer is rather than where the business sits. Where the buyer owes tax but the seller did not collect it, use tax is the counterpart concept. In Europe and many other markets the equivalent is value added tax, collected at each stage of the chain rather than only at the final sale.
Records, Returns and Getting Help
Registration produces obligations that continue: periodic returns, even for nil periods in many jurisdictions, and record retention for exemption certificates and invoices. Automating the calculation through a tax engine is worth it once a store sells into more than a handful of jurisdictions, because product taxability rules vary – a clothing item, a digital download and a food product can be treated differently in the same state.
The boundary of this topic is advice: rules change, thresholds differ, and penalties are real. Use this as a map of the questions, then confirm the specifics with a tax adviser in each market before filing.
Tax sits inside the wider margin picture covered in what is actually eating dropshipping revenue. Multi-channel sellers should read it alongside running Shopify, eBay and TikTok Shop from one 3PL, because channel mix changes which facilitator rules apply. For upstream registration questions on the import side, duties, de minimis and import VAT is the companion piece, and switching 3PLs without breaking orders covers what happens to tax configuration during a migration.
Preguntas frecuentes
¿Qué es la conexión económica?
A rule that creates a tax registration obligation from selling into a jurisdiction above a set revenue or transaction threshold, even with no physical presence there.
Do marketplace sales count toward my threshold?
In many jurisdictions yes, even where the platform remits the tax. Threshold measurement and remittance responsibility are separate questions.
If the marketplace collects the tax, do I still file?
Often yes. Many jurisdictions require a return reporting sales where a facilitator remitted, sometimes with a nil tax amount.
Does nexus apply to my own website sales?
Yes. Facilitator rules generally cover marketplace transactions only, so direct storefront sales remain the seller’s responsibility.
What records should I keep?
Sales by destination with channel split, tax collected per channel, exemption certificates, and the filing confirmations for each jurisdiction.
What happens if I cross a threshold without registering?
You may owe tax that should have been collected, plus interest and penalties, and the exposure grows each period until registration.
Are digital products treated the same as physical goods?
No. Taxability rules for digital goods, software and services differ by jurisdiction and are a common source of miscollected tax.
