Sales Tax Rules for E-commerce in the U.S. – 2025 Update

Regulation around sales tax for e-commerce businesses has continued to evolve rapidly, and 2025 is no exception. With more states tightening enforcement, expanding economic nexus thresholds, and increasing scrutiny of online transactions, U.S. e-commerce businesses face a complex and shifting tax landscape.

Understanding and complying with the latest sales tax rules is not just about following the law, it’s about protecting your business from unexpected liabilities, audits, and penalties. Whether you sell on Shopify, Amazon, Etsy, or your platform, staying current with 2025 sales tax changes is essential for financial health and operational continuity.

This article outlines the most important updates, rules, and best practices U.S.-based e-commerce businesses need to know for 2025.

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The Foundation: What is Sales Tax Nexus?

Physical vs. Economic Nexus

Sales tax nexus determines whether a business must collect sales tax in a particular state. In 2025, there are two primary forms of nexus:

• Physical Nexus: You have a physical presence in the state (office, employee, warehouse, or inventory).
• Economic Nexus: You exceed a threshold of sales or transactions into the state, even if you have no physical presence.

As of 2025, all 45 states with a sales tax impose economic nexus laws, many modeled after the 2018 South Dakota v. Wayfair decision.

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2025 Economic Nexus Thresholds: What’s Changing?

Lower Thresholds in Some States

In 2025, a growing number of states will have lowered their thresholds to capture more small and mid-sized sellers. Common thresholds now include:

• $100,000 in annual sales, or
• 200 separate transactions into the state

However, some states are eliminating the transaction-count threshold, focusing exclusively on sales volume. Others have introduced tiered thresholds for digital vs. tangible goods.

Digital Goods and SaaS Are Under Closer Watch

More states now explicitly tax digital products—like e-books, music downloads, and streaming subscriptions—as well as Software-as-a-Service (SaaS) platforms. If your e-commerce business offers any of these, you may now need to collect sales tax in additional states.

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Marketplace Facilitator Laws: Who Is Responsible?

If you sell through third-party platforms like Amazon, Etsy, or Walmart Marketplace, you may not be responsible for collecting and remitting sales tax yourself. Most states have marketplace facilitator laws, which shift the burden of collection to the platform.

What’s Required From Sellers?

Even if the marketplace handles sales tax collection:

• You may still need to register in certain states.
• You may still be liable for non-marketplace sales, such as those on your website.
• You are responsible for keeping accurate records and reporting marketplace sales correctly.

Failing to comply with these obligations—even if you think the platform “handles it all”—can lead to compliance issues.

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State-Specific Filing Requirements and Variations

Monthly, Quarterly, or Annual Filings

States may require sales tax returns to be filed monthly, quarterly, or annually based on your total volume. In some cases, once a nexus is established—even if your sales fall later—you may still be expected to file returns for years.

Local Taxes Add Complexity

Sales tax in the U.S. isn’t just a state-level issue. Many states allow local jurisdictions (cities, counties) to add additional sales tax rates, creating hundreds of variations.

Your sales tax collection must:

• Identify destination-based sourcing (most states)
• Account for rate changes and holiday exemptions
• Reflect local tax jurisdictions, even for online orders

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Taxability of Products in 2025

More Products Are Being Taxed

States are expanding the types of goods and services subject to sales tax, especially in:

• Health and wellness (e.g., vitamins, fitness apps)
• Food delivery and meal kits
• Streaming services and mobile apps
• Downloadable content

Always verify taxability per state, as what’s taxable in one state may be exempt in another.

Bundled Transactions Are Scrutinized

If you sell a combination of taxable and non-taxable items (e.g., physical products with digital content), these are often treated as “bundled transactions,” which many states consider fully taxable. In 2025, states are tightening the rules around how these should be reported.

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Tax Collection Tools and Technology

Why Automation Is Essential

Manually tracking sales tax rates across states and jurisdictions is no longer feasible for most e-commerce sellers. Instead, businesses should invest in sales tax automation solutions that integrate with:

• Shopping carts (Shopify, WooCommerce, BigCommerce)
• Accounting systems (QuickBooks, Xero)
• Marketplaces and ERPs

These tools:

• Apply real-time tax rates at checkout
• Track economic nexus thresholds
• Generate ready-to-file reports

2025 Compliance Tip

If you haven’t implemented automation yet, 2025 is the year to do it. Enforcement is increasing, and audits are expanding beyond major enterprises to mid-sized online sellers.

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How to Stay Compliant: A 2025 Sales Tax Checklist

Use this checklist to ensure you’re staying ahead of current regulations:

Evaluate Nexus Exposure

• Review total sales by state for the past 12 months
• Monitor thresholds monthly for new nexus creation

Register Where Required

• Ensure proper registration in every state where nexus exists
• Include non-marketplace channels like your website

Update Product Taxability

• Confirm tax rules for each product in each state
• Reclassify digital vs. tangible goods accurately

Automate Sales Tax Collection

• Choose a platform that integrates with your e-commerce stack
• Apply tax rates based on customer location and local jurisdiction

File and Remit Sales Tax

• Know your state filing frequencies
• Submit zero-dollar returns if required—even if no sales occurred

Keep Records

• Maintain records for at least 4 years in case of an audit
• Include exemption certificates, filing confirmations, and marketplace reports

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Common Pitfalls to Avoid

Ignoring Nexus in New States
Don’t assume small sales don’t matter. If you exceed thresholds—even briefly—you may owe sales tax retroactively.

Relying on Marketplace Only
If you also sell through your site, you’re responsible for collecting and filing tax yourself.

Assuming All Digital Products Are Non-Taxable
That was true years ago. In 2025, most states will tax digital goods and subscriptions.

Filing Incorrectly or Not at All
Many states require returns even if no tax is due. Missing a filing can lead to penalties and non-compliance flags.

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Conclusion

Sales tax compliance for e-commerce in 2025 is more demanding than ever, but it doesn’t have to be overwhelming. By understanding how regulations have shifted, staying on top of economic nexus rules, and using the right tools, you can protect your business from unnecessary risk and focus on growth.

With tax authorities expanding enforcement and technology making compliance more achievable, now is the time to take action. Review your nexus exposure, update your systems, and streamline your filing strategy before small issues become major liabilities.

Finalert Consulting & Accounting specializes in helping online businesses simplify sales tax compliance through fractional CFO support, nexus reviews, and tax automation setup. Let us know if you’d like help creating a customized compliance roadmap for your business.