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Wayfair decision: Seven mistakes online sellers make

The Wayfair decision changed online selling more than almost any tax ruling in a generation, and eight years later, plenty of multi-state sellers are still operating as if it never happened. You probably know the headline: after South Dakota v. Wayfair, states can require you to collect sales tax based on how much you sell into them, not just where your business happens to be located.

What trips sellers up is how to implement the changes that came from the ruling.This includes shifting thresholds, marketplace rules, registration deadlines, product-by-product taxability, and a patchwork of state-specific details that keeps evolving year to year. Eight years on, those moving parts are exactly where compliance quietly slips.

Here’s the good news: every one of these challenges is easy to automate and getting compliance right is less of a chore and more of a growth advantage. It clears the way to sell confidently into any state without looking over your shoulder. Let’s walk through the seven most common mistakes and how to remediate them.

What was the Wayfair decision? A quick recap

On June 21, 2018, the US Supreme Court decided South Dakota v. Wayfair, Inc. in a 5-4 ruling. The Court overturned a decades-old standard from Quill Corp. v. North Dakota (1992), which said a state could only require a business to collect sales tax if it had a physical presence there, including a store, warehouse, employees, or inventory. 

In its place, the Court recognized economic nexus: the idea that enough economic activity in a state can create a tax-collection obligation on its own. South Dakota’s law, the one the Court upheld, set the original benchmark at $100,000 in sales or 200 separate transactions in the state.

As a result, there are two ways to trigger sales tax nexus: physical presence and economic activity.

Sales tax before and after the Wayfair decision

Before Wayfair, a seller in Ohio could ship to all 50 states and only collect sales tax in Ohio, because that’s where the business was physically located. Customers technically owed use tax on those purchases, but few paid it, and states had no practical way to enforce it.

After Wayfair, the math flipped. Now your sales volume into a state can obligate you to collect there even if you’ve never set foot in it. Within a few years of the ruling, every state with a state-widel sales tax, all 45, plus Washington, D.C. and Puerto Rico, had passed an economic nexus law. The physical-presence only era was over, and the economic-activity and physical-presence era is the one you’re selling in now.

Mistake #1: Not tracking economic nexus thresholds

The most common mistake is assuming there’s one magic number. Many sellers memorized “$100,000 or 200 transactions” and called it a day. In reality, thresholds vary by state, and they’re a moving target.

The reality is, these economic nexus thresholds vary by state. Many states have even dropped the transaction-count threshold altogether, some use different dollar amounts entirely, and others revisit their numbers periodically. 

A few details make all the difference. Some states measure your gross sales, others only your taxable sales. Some look at the current calendar year, others at the current or previous year. And many states apply “trailing nexus,” meaning your obligation can continue for a set period even after your sales dip below the threshold. Our economic nexus guide walks through how each state defines its own line.

The fix is to monitor your sales against each state’s specific rules on a rolling basis. Knowing you’re approaching a threshold before you cross it is the difference between registering on schedule and scrambling to cover back taxes.

How TaxJar helps: TaxJar tracks your sales against each state’s individual threshold rules,whether that’s gross versus taxable sales, calendar-year timing, or trailing nexus periods, instead of applying a single blanket figure to every state. This ongoing, rolling monitoring means you’ll see a threshold approaching well before you cross it, giving you time to register on schedule rather than scrambling to cover back taxes after the fact.

Which states have the lowest thresholds?

Many states have a $100,000 sales threshold. However, a handful set the bar higher: California and Texas use $500,000, New York requires more than $500,000 in sales and at least 100 transactions, and a few states, including Alabama and Mississippi, sit at $250,000.

The trickier trap is the transaction count. While many states use only an economic threshold, others use transactions and sales figures to qualify nexus. States also can mandate nexus according to a sales transaction threshold. In states that still use a 200-transaction trigger, a seller of low-priced items can hit nexus with surprisingly little revenue; 200 orders of a $5 product is just $1,000 in sales, yet it can create a filing obligation.

The encouraging trend: states are beginning to remove the transaction threshold. As of January 1, 2026, at least 16 states, including South Dakota itself, have eliminated the 200-transaction threshold, with Alaska, Utah, and Illinois among the recent examples. Kentucky is set to remove its transaction threshold on August 1, 2026. For low-dollar, high-volume sellers, that shift is genuinely good news.

Mistake #2: Failing to register after hitting a nexus threshold

Once you cross a state’s threshold, registering for a sales tax permit isn’t optional paperwork you can get to later. 

If you don’t register and don’t collect, the obligation doesn’t vanish; it becomes money you owe out of your own pocket, plus penalties and interest that grow the longer it sits unaddressed.

If you’ve already missed registrations in one or more states, there is a path forward. Many states offer voluntary disclosure agreements that let you come forward, limit how far back they’ll look, and often waive penalties. Catching up proactively is almost always cheaper and calmer than waiting for a state to find you first.

How TaxJar helps: TaxJar monitors your sales activity against each state’s threshold in real time, flagging exactly when you need to register before you’re legally required to start collecting. If you’ve already fallen behind, TaxJar can help you identify every state where registration is overdue, giving you the clarity to pursue voluntary disclosure agreements proactively rather than waiting for a state to catch the gap first.

Mistake #3: Misunderstanding marketplace facilitator laws

If you sell on Amazon, Etsy, eBay, or Walmart, you should be aware of marketplace facilitator laws. Every state with a sales tax now requires these marketplaces to collect and remit tax on the sales that happen on their platforms. 

Here’s the catch: the marketplace only handles the sales made through the marketplace. Anything you sell through your own website, at a trade show, or wholesale is still yours to collect, remit, and file.

Two more details surprise sellers. In many states, your marketplace sales still count toward your economic nexus threshold, which can require you to register even when the platform is the one remitting. And once you’re registered, you typically still file returns, often a simple “zero return”, to stay in good standing. The safe move is to keep your permits current and know exactly which channels each state expects you to handle.

How TaxJar helps: TaxJar sorts your sales by channel automatically, making it clear at a glance which transactions the marketplace has already covered and which ones still need your attention for collection and remittance. It also factors marketplace sales into your economic nexus calculations and helps you stay current on filings, including the zero returns states still expect once you’re registered.

What Etsy sellers must know about Wayfair

Etsy collects and remits sales tax on Etsy orders automatically, in every US state that requires it. Many Etsy sellers read that and assume they’re fully covered. They aren’t always.

The moment you sell anywhere else, your own Shopify shop, a craft fair, an Instagram checkout that doesn’t qualify as a facilitator, those sales are yours to manage. And in states where marketplace sales count toward nexus, your Etsy volume can push you over a threshold and require you to register, even though Etsy is the one remitting the tax. The marketplace can only see its own channel. You’re the only one who sees the whole picture, which is why tracking every channel in one place matters so much.

Mistake #4: Ignoring product taxability rules

Not everything is taxed the same way, and product taxability is where a lot of accurate-looking returns quietly go wrong. Product taxability is not simply about whether a product is taxable, it also affects the rate at which a product is taxed.

Clothing, groceries, digital products, and supplements all get treated differently across the map. That variation cuts both ways. Charge tax on an item that a state treats as exempt, and you overcharge customers, which can dent conversions and invite refund requests. Treat a taxable item as exempt and you under-collect, leaving yourself to cover the difference later.

In addition, groceries and other goods may also be taxed differently even in the same state. For example, a salad packaged with a fork may be taxed by a state at a higher rate (as it may be considered a ‘prepared food’) versus a salad served without a fork. These small nuances make a difference for sales tax calculations, and businesses need to understand taxability on every product they sell.

The fix is to classify each product correctly for every state where you have nexus, then revisit those classifications as your catalog grows. 

How TaxJar helps: TaxJar automatically classifies your products according to each state’s specific taxability rules, so you don’t have to manually track how clothing, groceries, digital products, or nuanced cases like packaged salads are treated differently across every state where you have nexus. As your catalog grows and product mix changes, TaxJar keeps those classifications current, helping you avoid the overcharges and under-collections that come from applying the wrong rate.

Mistake #5: Mismanaging exemption certificates

Selling to resellers, nonprofits, or other exempt buyers is common practice – but the exemption only holds up if your paperwork does. To make a tax-free sale, you need to collect a valid exemption or resale certificate from the buyer at the time of sale, then store it and keep it current.

This is one of the first places auditors look, because the errors are easy to spot: a certificate missing a signature or date, one filled out after the sale, the wrong state’s form, or no certificate on file at all. If a certificate is invalid or missing, the state can treat the sale as taxable and hold you – the seller – liable for the tax you didn’t collect, plus interest and penalties.

Build a simple routine to request, validate, and renew certificates, and store them somewhere you can find them fast. Future-you, mid-audit, will be grateful.

Mistake #6: Mishandling California nexus rules

California deserves its own line item because it doesn’t follow the common playbook. Under Assembly Bill 147, effective April 1, 2019, California’s economic nexus threshold is $500,000 in sales of tangible personal property delivered into the state in the current or prior calendar year. There’s no transaction count; it’s a pure dollar test, whether that’s three large orders or 10,000 small ones. 

Two things commonly catch sellers off guard. First, your marketplace sales count toward that $500,000 even when the marketplace remits the tax. Second, once you’re over the threshold, you also collect California’s district taxes, which vary by city and county.

If you meet the threshold, you register with the California Department of Tax and Fee Administration before your next sale. California enforces this actively, and operating without a permit can carry steep penalties. So, it’s well worth getting right early.

SaaS companies also need to know that the taxability of their products will change in 2027 in the state of California. On January 1, 2027, SaaS will be subject to sales and use tax.

How TaxJar helps: TaxJar tracks your California sales, including marketplace transactions, against the state’s $500,000 dollar-only threshold, so you know exactly when you cross the line and need to register with the CDTFA — even without a single large order. It also handles the added complexity of California’s varying district taxes and can help SaaS companies get ahead of the state’s 2027 shift to taxing SaaS products.

Mistake #7: Failing to file or filing in the wrong frequency

Registering and collecting is only part of the job; you also have to file on the schedule the state assigns you. When you register, the state gives you a filing frequency, monthly, quarterly, or annually, usually based on your expected sales volume. 

A few rules keep you out of trouble. File every period on time, even when you don’t have sales tax to remit – most states still expect a “zero return.” Watch for updates related to frequency changes, because states adjust your schedule as your volume grows or shrinks, and they don’t always make it obvious. Missing a deadline or filing on the wrong cadence can trigger penalties even when your tax was collected correctly.

Set calendar reminders by state, or automate the filings entirely so nothing slips through the cracks during a busy season.

How TaxJar helps: TaxJar keeps track of each state’s assigned filing frequency and can automatically prepare your returns on the right cadence, including zero returns for periods with no sales tax due. It also monitors for frequency changes as your volume shifts, and can automate filings entirely, so deadlines never slip through the cracks even during your busiest seasons.

How does the Wayfair decision affect online shoppers?

For shoppers, the Wayfair decision mostly ended the era of “tax-free” online shopping. You’ll now see sales tax added at checkout on most online purchases, no matter where the seller is located. That tax was technically owed all along as use tax; Wayfair simply shifted the job of collecting it to sellers and marketplaces.

There are still a few places shoppers won’t see state-wide sales tax: the five NOMAD states – New Hampshire, Oregon, Montana, Alaska, and Delaware – which have no statewide sales tax. Alaska is the asterisk: it has no state sales tax, but many local jurisdictions levy their own. Everywhere else, that line on the receipt is here to stay.

Stop guessing and start automating. TaxJar calculates the right sales tax rate for every state, monitors your nexus exposure, and files returns on your behalf. See how TaxJar works.

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