Sales tax mistakes that can cost you thousands

Sales tax is the single most-ignored tax for growing businesses - and the one most likely to surface as a six-figure liability when you raise money or sell the company. The rules changed in 2018 and most founders haven't caught up. Here are the five landmines we see most often.

Landmine 1: Ignoring economic nexus

Before 2018, you only owed sales tax in states where you had a physical presence - an office, employees, inventory. That world is gone. The Supreme Court's Wayfair ruling in 2018 created economic nexus: if you cross certain thresholds in sales or transactions into a state, you owe sales tax there even if you've never set foot in it.

Most states' threshold is $100,000 in sales OR 200 separate transactions per year. A handful (California, Texas, New York) use $500,000. Cross the threshold and you have 30–60 days to register and start collecting.

Landmine 2: Misreading marketplace facilitator rules

If you sell on Amazon, eBay, Etsy, Shopify (via Shop Pay), or any marketplace, that marketplace usually collects and remits sales tax for you. Great - but it doesn't mean you're off the hook.

• Marketplace sales count toward your nexus thresholds in some states.
• Sales through your own site (direct sales) still require you to collect.
• Some states require you to register and file zero-dollar returns even if a marketplace handles all collection.

Landmine 3: Assuming SaaS isn't taxable

SaaS taxability is a state-by-state mess. Software-as-a-service is taxable in roughly 25 states (including Texas, New York, Pennsylvania, Washington, Arizona) and non-taxable in others (California, Florida, Massachusetts in most cases).

Even within "SaaS is taxable" states, the line between "taxable digital good" and "non-taxable professional service" depends on what you actually sell. Pure SaaS is usually taxable. Implementation work is sometimes service. Bundled deals get prorated. The wrong assumption is to look at California, see it's not taxable, and ship to 49 other states without checking.

Landmine 4: Failing to exempt B2B customers

Many B2B customers are exempt from sales tax - but only if you have a valid resale or exemption certificate on file. If a customer says "we're tax-exempt" and you take their word for it without the certificate, you're on the hook when the state audits you.

Build a process: every tax-exempt customer must upload a valid certificate for their state before their first invoice. Re-verify annually. Store the certificate in a place an auditor can find it three years from now.

Landmine 5: Treating sales tax as a bookkeeping afterthought

Sales tax isn't your money. It's the customer's money you're holding on the state's behalf. Treat the collected amount as a liability on your balance sheet, sweep it into a separate account, and remit it on schedule.

The two failure modes we see:

1. 1Mixing collected sales tax into operating cash, spending it, then scrambling at the filing deadline.
2. 2Forgetting to file the zero-dollar returns the state still expects from you in months you have no sales. That triggers automatic late-filing penalties even when you owe $0 in tax.

What to do next

If you sell into multiple states and have never reviewed nexus: run a nexus study now, before your next fundraise or M&A event. Most states have voluntary disclosure programs that cap your back-tax exposure if you self-report - they're much friendlier than waiting for the state to find you.

If you're already over thresholds but not registered: stop selling there OR register and start collecting today. The longer you wait, the bigger the back-tax bill.

If you'd rather not learn 50 states' sales-tax rules: that's exactly the kind of thing we handle. Bring us your sales data and a list of states; we'll map your nexus and clean up the rest.