US Sales Tax Nexus for Canadian E-Commerce Sellers

Many Canadian sellers operating on Amazon assume the same thing: Amazon collects sales tax on US sales, so they are covered. That assumption is partially correct and often dangerously incomplete.

Amazon does collect and remit sales tax on marketplace sales in all US states that impose a sales tax. That is the result of marketplace facilitator legislation that passed across the US following the 2018 Supreme Court decision in South Dakota v. Wayfair. But marketplace facilitator collection handles one part of the problem. It does not resolve nexus, it does not cover sales made outside the marketplace, and it does not eliminate registration or filing obligations in many states.

This guide explains what nexus means, how it arises for Canadian sellers, and what marketplace facilitator laws do and do not resolve.

Two Types of Nexus

Nexus is the connection between a seller and a state that gives the state the right to require the seller to collect and remit sales tax, register with the state tax authority, or both.

There are two ways nexus is established.

Physical nexus is created by having a physical presence in a state. This includes owning or leasing property, having employees or contractors based there, or storing inventory there. For Canadian sellers using Amazon FBA, physical nexus is almost certain in multiple US states. Amazon operates more than 40 fulfillment centers across the United States and distributes FBA inventory across its network. A seller who ships products into Amazon’s fulfillment network does not choose where that inventory is stored. Amazon moves it. As a result, FBA sellers commonly have inventory in 10 or more states simultaneously, each of which constitutes physical nexus, regardless of sales volume.

Economic nexus is created by selling into a state above a defined revenue or transaction threshold, without any physical presence required. Prior to 2018, states could only impose sales tax collection obligations on sellers with a physical presence. The Supreme Court’s ruling in South Dakota v. Wayfair changed that. South Dakota’s law established that any seller with more than USD $100,000 in annual sales into the state, or more than 200 separate transactions, had nexus and a collection obligation. The Court upheld it. Within two years, nearly every state with a sales tax had passed similar legislation.

The specific thresholds vary by state. Most use USD $100,000 in sales or 200 transactions in a calendar year. Some states set higher thresholds or different counting rules. Texas applies a USD $500,000 safe harbor: sellers below that amount are not required to register or collect. New York requires both USD $500,000 in sales and more than 100 transactions in the preceding four sales tax quarters. California sets its threshold at USD $500,000 in annual sales into the state.

Five states impose no state sales tax at all: Alaska, Delaware, Montana, New Hampshire, and Oregon. Sellers with no nexus outside those states have no state sales tax exposure. For everyone else, nexus in any state with a sales tax means a potential collection and registration obligation.

Being based in Canada does not create an exemption. Economic nexus is determined by where the buyer is located and how much you sell there.

What Marketplace Facilitator Laws Cover

Following the Wayfair decision, states moved quickly to pass marketplace facilitator legislation. These laws place the obligation to collect and remit sales tax on the marketplace platform itself, not on the individual seller, for sales made through that platform.

Amazon collects and remits sales tax on behalf of third-party sellers for all US states that impose a sales tax. Etsy and Walmart Marketplace operate under the same framework and collect on marketplace sales in states where facilitator legislation applies.

For those sales, the seller does not collect, does not remit, and does not owe the tax directly to the state. The platform has already handled it.

What Marketplace Facilitator Laws Do Not Cover

The facilitator collection obligation applies only to sales made through that specific marketplace. It does not extend to the seller’s other activity.

Direct website sales. If you operate a Shopify store and process payments directly through Shopify Payments or another payment processor, you are the seller of record. Shopify is not a marketplace facilitator for storefront sales in the same sense as Amazon or Etsy. Shopify collects payment on your behalf; it does not assume the sales tax remittance obligation. If you have economic nexus in a state based on total sales volume across all channels, the collection and remittance obligation on those direct sales belongs to you. The same applies to any channel where you are the merchant of record and no marketplace facilitator is involved.

Third-party logistics inventory. If you store inventory in a US warehouse operated by a 3PL provider rather than Amazon, that inventory creates physical nexus in the state where the warehouse is located, regardless of whether you sell through a marketplace.

Wholesale and B2B transactions. Sales to US businesses for resale are typically exempt from sales tax when the buyer provides a valid resale certificate. But handling those transactions correctly still requires a registration in most states and a process for collecting and verifying exemption certificates.

Where the Registration Question Stands

Marketplace facilitator collection removes the collection obligation on marketplace sales. It does not always remove the registration obligation.

Some states require sellers with nexus to register, obtain a sales tax permit, and file periodic returns even when the marketplace is remitting all the tax on their behalf. The return would show zero seller-remitted tax, but the filing obligation exists. The rules vary by state and change periodically.

For FBA sellers, this is a direct practical issue. Having inventory in a state creates physical nexus in that state. Physical nexus typically triggers a registration requirement independent of whether any tax is owed.

The Streamlined Sales Tax Governing Board maintains a simplified registration system covering 22 member states and is one entry point for sellers working through multi-state registration. It does not replace state-level compliance review, but it simplifies the registration step across member states.

Where Canadian Sellers Are Most Exposed

FBA inventory creates nexus before the first sale. A Canadian seller who ships inventory to Amazon for the first time has physical nexus in every US state where Amazon stores that inventory, from the moment it arrives. There is no sales volume threshold to cross first. The nexus is physical and immediate.

Thresholds apply across all sales channels. Economic nexus thresholds in most states count total sales into the state, not just sales through one marketplace. A seller with USD $80,000 in Amazon sales and USD $30,000 in direct Shopify sales into a state with a USD $100,000 threshold has crossed that threshold, even though neither channel alone would have triggered it.

Canadian incorporation does not create an exemption. Economic nexus applies based on where the buyer is located. A Canadian corporation selling to US consumers has the same nexus exposure as a US-based seller with identical sales activity.

Uncorrected exposure grows over time. A seller who crossed a state’s economic nexus threshold two years ago and has been selling there without registering has two years of potential unfiled obligations. That exposure does not reset or expire on its own. Most states offer a voluntary disclosure program that allows sellers to come forward, settle back-period liability under negotiated terms, and establish a clean filing record going forward. Voluntary disclosure does not eliminate the liability, but it is a structured path that avoids the penalties and interest that accumulate when a state discovers non-compliance on its own.

Scope of This Guide

This guide covers the nexus concepts that determine whether a Canadian e-commerce seller has obligations in US states. It does not cover:

• State-by-state registration procedures
• Sales tax rates or product taxability rules
• Returns preparation or remittance mechanics
• GST/HST implications on the Canadian side of the business
• US federal income tax obligations

Nexus is the starting point. Knowing which states you have nexus in, and whether registration or filing obligations exist in each of those states, is the step that comes before any other compliance work.

If you are unsure whether you have nexus in US states, or you have been operating without reviewing it, the right time to get clarity is before the volume compounds further.

Get in touch to discuss your situation.