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Editorial 6 MIN READ

Remote-seller rules, four and a half years after Wayfair

Forty-five states and the District of Columbia collect on out-of-state sellers; Missouri is the last holdout, and even it has flipped

The Editors
Staff, Incorporator.org
6 min read Updated
Contents 8 sections
  1. What every state has now done
  2. Marketplace facilitators carry most of the load
  3. Streamlined Sales Tax stayed at 24
  4. The compliance stack
  5. Audits are picking up
  6. The crack-and-pack problem
  7. What remains unsettled
  8. Sources

n June 21, 2018, the Supreme Court decided South Dakota v. Wayfair, Inc., 585 U.S. ___ (2018), and erased the physical-presence rule that had governed state sales-tax jurisdiction since Quill in 1992. Four and a half years later, state remote-seller rules are the baseline, and the last general-sales-tax state not yet collecting from out-of-state sellers is Missouri, which flips on January 1, 2023.

The texture is where the compliance work lives.

What every state has now done

Forty-five states impose a general sales tax. (The outliers: Alaska, Delaware, Montana, New Hampshire, Oregon, though Alaska has municipal sales tax administered by the Alaska Remote Seller Sales Tax Commission.) Forty-four already enforce economic-nexus collection against remote sellers. Missouri becomes the forty-fifth on January 1, 2023, under SB 153 / SB 97, signed by Governor Mike Parson on June 30, 2021 and codified at Mo. Rev. Stat. § 144.605(2). The District of Columbia also enforces economic nexus.

The standard Wayfair threshold, the one the Court blessed in the South Dakota statute it reviewed, is $100,000 in gross sales or 200 transactions into the state over the prior or current calendar year. Most states adopted something close, but the landscape has drifted in two directions since 2018.

The first drift is upward. California (Cal. Rev. & Tax. Code § 6203) sits at $500,000 with no transaction-count prong. Texas (34 Tex. Admin. Code § 3.286) sits at $500,000 in Texas-sourced gross revenue, also no count. New York holds a two-prong rule at $500,000 and more than 100 transactions (N.Y. Tax Law § 1101(b)(8)(iv)).

The second drift is the quiet abandonment of the 200-transaction trigger. North Dakota, Washington, Wisconsin, Iowa, and Maine, among others, eliminated the transaction count after small sellers tripped nexus on a few hundred $12 orders without coming close to $100,000. Connecticut and New York still pair dollars with transactions, though Connecticut loosened the old $250,000 / 200 combination under SB 877 in 2019 (Conn. Gen. Stat. § 12-407(a)(15)(A)(ix)).

Marketplace facilitators carry most of the load

The second revolution, arguably the more important one for sellers on Amazon, eBay, Etsy, or Walmart Marketplace, is the marketplace-facilitator law. These statutes shift collection responsibility from the third-party seller to the platform, on the theory that the platform has visibility into the transaction and the infrastructure to compute tax.

Forty-six jurisdictions (forty-five states and D.C.) had marketplace laws on the books by the start of 2022, per the Streamlined Sales Tax Governing Board. Missouri's new law includes marketplace collection alongside its remote-seller provisions, effective January 1, 2023. Florida and Kansas were the late arrivals, both under SB 50 (2021), effective July 1, 2021.

The operational consequence for a small Etsy seller is large and mostly good. If you sell exclusively through a covered marketplace, the platform collects and remits, and in most states the marketplace's sales do not count toward your own economic-nexus threshold for direct-channel sales. The trap is mixed-channel operators: a seller shipping through Amazon FBA and also through a Shopify store has to track two flows. Amazon handles the Amazon side; Shopify does not handle the Shopify side unless the seller configures it.

Streamlined Sales Tax stayed at 24

The Streamlined Sales and Use Tax Agreement, the pre-Wayfair voluntary compact that tried to rationalize multistate sales-tax administration, still has twenty-four full member states. The list has not expanded materially since 2018; Wayfair removed the carrot of voluntary harmonization because states could impose their rules unilaterally. Membership still matters for sellers using a Certified Service Provider, which in SST states can get the seller's compliance costs paid by the state rather than out of pocket. For a remote seller with sales in thirty or forty states, the SST CSP program is the best piece of residual infrastructure from the pre-Wayfair era.

The compliance stack

A remote seller with nexus in ten or more states does not compute sales tax by hand. The three platforms carrying most of this traffic are Avalara (acquired by Vista Equity Partners in a deal announced August 8, 2022 at $93.50 per share), Vertex (NASDAQ: VERT), and TaxJar, acquired by Stripe in April 2021. Shopify Tax, launched in 2022, bundles calculation into the platform for Shopify merchants.

Pricing runs from a few hundred dollars a year for a seller in two or three states to five figures for a multistate operation with FBA inventory in several warehouses. The number to watch is not the software subscription but the return-filing count: a seller with nexus in thirty-two states can file close to four hundred returns a year once monthly, quarterly, and annual filers are stacked, and each return is a place something can go wrong.

Audits are picking up

The first two years after Wayfair were light on enforcement. That grace period is closing. The California Department of Tax and Fee Administration (CDTFA) has been the most visible: since 2021 it has run compliance sweeps targeting out-of-state sellers with identifiable California-shipped sales, pulled from FBA inventory reports and processor data. New York, Washington, and Texas are running similar programs. Assessments frequently reach back to the state's economic-nexus effective date (for California, April 1, 2019 per CDTFA Special Notice L-684), and penalty and interest on three years of uncollected tax can exceed the seller's annual net margin.

"I didn't know" is not a defense. "The state never told me" is also not a defense. A voluntary-disclosure agreement negotiated before an audit notice arrives is almost always cheaper than the post-notice path; most states run a VDA program that waives penalties and caps the lookback at three or four years.

The crack-and-pack problem

The population Wayfair has hit hardest is the small, high-volume, low-margin seller: the Etsy hobbyist, the one-person Shopify store, the solo operator running a warehouse out of a garage. Six-figure gross revenue across forty states can imply returns in thirty, and compliance overhead does not scale down. A seller moving $120,000 a year in $15 orders can easily spend 15% of gross on software, registration fees, and bookkeeper time.

Marketplace-facilitator laws have absorbed most of this population because most of these sellers live on Etsy, eBay, or Amazon. The exposed ones are those running their own storefronts, and the honest advice for that cohort is to route through a marketplace until direct-channel revenue justifies dedicated compliance infrastructure.

What remains unsettled

Two pieces of the post-Wayfair landscape are still moving. The first is local-tax sourcing in home-rule states, chiefly Colorado, Louisiana, and Alabama, where remote sellers face hundreds of local jurisdictions with their own rates and, historically, their own administration. Colorado launched its SUTS portal in 2020 to unify remote-seller filing across its home-rule cities; by 2022 most of those municipalities had signed on, though not all.

The second is the constitutional ceiling. Wayfair approved South Dakota's $100,000 / 200-transaction rule as not unduly burdensome on interstate commerce but did not tell the states how low they could go. Kansas tried a zero-dollar threshold under Notice 19-04 in 2019; the Attorney General opinion (AG Op. 2019-8) concluded the notice was unenforceable without a statutory threshold, and Kansas later enacted a $100,000 floor in SB 50 (2021). No case has yet tested the outer limits of Wayfair's dormant-commerce-clause tolerance, because no state wants to be the litigation vehicle that gets Wayfair narrowed.

For anyone forming in 2022 with a sales-tax footprint, the operating reality is this: the pre-2018 freedom to sell into forty-nine states without registering anywhere is gone. If the business is a Delaware LLC serving a national customer base, the Delaware formation is the easy part. The thirty-some sales-tax registrations are the work.

Sources

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