Amazon FBA and Shopify Sales Tax: What Sellers Get Wrong

Ecommerce sales tax compliance rules vary by business structure, sales channel, and state. The guidance here is general. For obligations specific to your business, speak with a qualified sales tax specialist.

We hear some version of this story all the time.

A seller sets up Shopify. They turn on tax collection. They’re running FBA on Amazon. They figure it’s handled.

Then a letter arrives from a state. Or they sit down with an accountant. Or they do a nexus analysis for the first time. And they find out there’s a gap. Sometimes a big one.

Here’s the thing: in most of these cases, the seller didn’t do anything malicious. The rules around sales tax for multi-channel ecommerce are genuinely confusing. Amazon does some things. Shopify does other things. The two don’t add up to full compliance on their own. And the gaps are exactly where past due sales tax exposure lives.

This post walks through the most common reasons Amazon and Shopify sellers end up behind on sales tax, where the settings go wrong, the difference between two very different types of problems, and how to clean it up without wrecking your cash flow.

Why This Keeps Happening
What Amazon FBA Sales Tax Actually Covers
What Shopify Sales Tax Actually Covers
Two Very Different Problems
How to Clean It Up Without Wrecking Cash Flow
Frequently Asked Questions

Key Takeaways:

Amazon collects and remits sales tax on Amazon transactions, but it does not register you, file your returns, or cover sales on any other platform.
FBA inventory stored in Amazon fulfillment centers often creates physical nexus in states where that inventory sits, regardless of how much you have sold there.
Shopify is not a marketplace facilitator. Sales tax on every Shopify transaction is the seller’s responsibility to collect, remit, and file.
Turning on sales tax collection in Shopify without first registering in that state is a violation. The correct order is: cross the threshold, register, then enable collection.
Shopify’s nexus threshold alerts do not account for your Amazon sales. You need to track your full nexus footprint across all channels yourself.
Amazon sales and Shopify sales both count toward economic nexus thresholds in most states. The $100,000 threshold applies to total sales into a state, not just one platform.
There are two distinct past due situations: collected but never remitted, and never collected at all. Each has a different resolution path.
Collected but never remitted is treated as a trust fund issue by states, meaning it carries higher urgency than other compliance gaps.
Never collected at all is where Voluntary Disclosure Agreements are most valuable. A VDA limits the lookback period and can significantly reduce penalty exposure.
A nexus analysis covering every state, channel, and inventory location should always come before contacting any state or making any payments.
Most states will negotiate a payment plan if the full balance cannot be paid at once. Get all filings current first, then negotiate the payment.
Economic nexus thresholds keep moving as revenue grows. The goal is to catch new thresholds before they become exposure.

Why This Keeps Happening

Sales tax in the U.S. is a state-by-state system. There are 45 states with a state sales tax, and each one has its own rules, thresholds, registration requirements, and filing deadlines. There is no single federal system that ties it all together.

When you sell on one platform, in one state, to one customer type, that’s manageable. But most ecommerce sellers don’t look like that. Most are:

Selling on both Amazon and Shopify.
Shipping into 30 or 40 states.
Crossing economic nexus thresholds without actively tracking them.
Working off the assumption that the platforms are handling compliance.

That last assumption is where it breaks down. Amazon handles some of it. Shopify handles some of it. But neither handles all of it. The parts they don’t handle are entirely on you.

What Amazon FBA Sales Tax Actually Covers

Under marketplace facilitator laws, Amazon collects and remits sales tax on behalf of third-party sellers for transactions completed through their platform. All 45 states with a state sales tax have these laws. When a customer buys your product on Amazon, Amazon calculates the tax, collects it from the customer, and sends it to the state. You don’t touch that money.

For a lot of sellers, that sounds like problem solved. It isn’t.

Amazon Does Not Register You

Amazon collecting tax does not mean you’re registered. Registration is a separate step that is entirely your responsibility. In many states, you’re required to be registered and filing returns even if Amazon is handling all the collection.

In those cases, what you’re filing is a zero-dollar return, but the obligation to file still exists.
States like Washington, California, and Pennsylvania are known for requiring this.
If you’re not registered, you’re technically non-compliant, even in states where you owe nothing.

FBA Inventory Creates Physical Nexus

When Amazon stores your inventory across their fulfillment center network, those products are physically sitting in multiple states. That creates physical nexus in every one of those states, independent of how much you’ve sold there.

Amazon has fulfillment centers all over the country.
If you’re using FBA, you may have physical nexus in eight to ten states right now.
The only way to know which ones is to pull your inventory placement data from Seller Central.

Amazon Does Not Cover Your Other Channels

If you’re also selling on Shopify, through wholesale, or anywhere outside of Amazon, Amazon collects nothing on those transactions. You are fully responsible for sales tax on every sale that doesn’t go through Amazon’s platform.

In most states, your Amazon sales and your Shopify sales both count toward your economic nexus thresholds. So you might hit $100,000 in a state partly through Amazon and partly through Shopify, and the obligation applies to all of it.

What Amazon Handles	What You Still Own
Tax collection on Amazon transactions	Registration in nexus states
Remitting collected tax to states	Filing returns, including zero-dollar returns
Marketplace facilitator compliance	Tax on Shopify and other channel sales
	Monitoring FBA inventory placement for nexus

One more thing worth knowing: Amazon’s marketplace facilitator filings give states a list of every FBA seller and which states their inventory is in. So, while Amazon helps on the collection side, it also makes it easier for states to identify unregistered sellers.

What Shopify Sales Tax Actually Covers

Shopify is not a marketplace facilitator. It’s a sales platform, and that distinction matters.

Amazon acts as the seller on your behalf when it collects tax. Shopify just gives you the store. When a customer buys from your Shopify store, that’s a direct transaction between you and the customer. Sales tax on that sale is your responsibility to collect, remit, and file.

Shopify does have tax tools built in, but three settings problems show up over and over again.

Problem 1: Tax Collection Turned On Without Registration

A seller gets a Shopify notification about approaching a nexus threshold. They go into settings and enable tax collection in 15 states at once. But they haven’t registered in those states yet.

Here’s why that matters:

You are not legally allowed to collect sales tax in a state without a valid sales tax permit.
Collecting without a permit means you’ve collected money you’re not in a position to remit properly.
Some states treat collecting without a permit as a separate violation on top of any underlying compliance issues.

The right order is always: cross the threshold, register, then turn on collection in Shopify. Not the other way around.

Problem 2: Shopify’s Threshold Alerts are Not a Compliance System

Shopify will sometimes notify you when you’re approaching a nexus threshold. Sellers often read those alerts as “you don’t need to worry until this shows up.” That’s not what they mean.

Shopify’s threshold tracking has real limits:

It may not pull in all your sales channels.
It likely doesn’t know about your Amazon sales.
It may not account for how different states count marketplace facilitator sales toward thresholds.

Shopify’s notifications are a helpful signal. They are not a substitute for tracking your own nexus footprint across all channels.

Problem 3: Collecting the Right Amount in the Wrong Places

Sales tax rates include county and city rates on top of the state rate, and the combined rate changes, depending on where your customer is located. Shopify calculates these automatically when your settings are configured correctly. But if your tax settings are incomplete or your product tax codes are wrong:

Collecting too little means you owe the difference out of pocket.
Collecting too much means you’ve overcharged customers and may owe refunds.

Both are fixable. Both require clean data to resolve.

Two Very Different Problems

Not all past due sales tax situations are the same. There are two distinct problems with different causes and different paths to resolution.

	Collected But Never Remitted	Never Collected at All
What happened	Tax was charged to customers but never filed or sent to the state.	Nexus existed but Shopify settings weren’t turned on.
Where the money is	In your account, or was	Never came in
Urgency level	High. Money was held in trust.	Still serious. Liability is real.
Best resolution path	Get current on filings and remit what’s owed.	Consider a Voluntary Disclosure Agreement to limit lookback and penalties

Collected But Never Remitted

This is when your Shopify store was set up to collect sales tax from customers, the customers paid it, and the money never made it to the state.

States treat this differently from other compliance gaps because the money was collected in trust. Your customer paid it expecting it to go to the state. It’s not business revenue. That creates real urgency to resolve it quickly.

The good news: if you have the data showing what was collected, you know exactly what you owe. There’s no estimation involved. Get current on the filings and remit what’s sitting there.

Never Collected at All

This is when you had nexus in a state, you were obligated to collect sales tax, and your Shopify settings weren’t turned on. Customers were never charged, the state never received the tax, and there’s no record of having collected anything.

This situation feels less urgent because there’s no money sitting in an account. But the liability is still real:

You owe the state the tax that should have been collected.
That money has to come out of your business.
Add penalties for not filing.
Add interest that’s been compounding since the obligation began.

This is the situation where voluntary disclosure agreements become most valuable. A VDA can limit how far back the state looks and significantly reduce penalty exposure.

The key question when cleaning this up: which situation are you in? Or are you in both at once? That shapes the entire resolution strategy.

How to Clean It Up Without Wrecking Cash Flow

Here’s the approach we recommend, in order.

Step 1: Get the Full Picture Before You Do Anything

Before you pay anything or contact any state, know exactly what you’re dealing with. That means a proper nexus analysis covering every state, every channel, and every inventory location.

A lot of sellers skip this and start making calls to states or pulling together back payments, then find out they’ve admitted liability to a state where they might have had a strong case that they weren’t actually over the threshold. Know the full picture before you start talking to anyone.

Step 2: Prioritize by Exposure

You don’t need to fix everything at once. Prioritize:

States where your exposure is highest.
States where enforcement activity is most aggressive.
Any state where you have the collected-but-not-remitted situation.

Lower-exposure states can often be addressed through registration and prospective compliance first, with back periods handled through voluntary disclosure later.

Step 3: Use Voluntary Disclosure Agreements Where They are Appropriate

For states where you have significant back tax and penalty exposure and haven’t been found yet, a VDA is the most powerful tool available.

You come forward before the state finds you.
States typically limit the lookback period to three to four years.
Penalties are often reduced or eliminated entirely.
A $50,000 problem can become a $20,000 problem, sometimes significantly less.

Step 4: Negotiate the Payment

If the total amount owed is more than you can pay at once, most states will work with you on a payment plan:

Interest continues during the plan, but it keeps you in good standing.
It keeps enforcement at bay while you work through the balance.
Most states want all outstanding returns filed before setting up a payment plan.
Get the filings current first, then have the payment conversation.

Step 5: Fix the Settings Going Forward

Once you’ve handled the back periods:

Register in every state where you have nexus.
Turn on collection in Shopify after registration is confirmed, not before.
Verify that your product tax codes are correct.
Set up a way to monitor your nexus footprint as you grow.

Economic nexus thresholds don’t stop moving just because you fixed last year’s problem. As revenue grows, you’ll cross new thresholds. The goal is to catch them before they become exposure.

Frequently Asked Questions

Does Amazon FBA create sales tax nexus in every fulfillment center state? Yes. When Amazon stores your inventory in their fulfillment centers, those products are physically present in those states. That creates physical nexus independently of how much you’ve sold there. You may be required to register and file in those states even when the return is for zero dollars.

Can we turn on Shopify sales tax collection before registering in a state? No. You need a valid sales tax permit before collecting tax in any state. Collecting without one means you’re holding money you can’t properly remit, and some states treat it as a separate violation. The correct order is: cross the threshold, register, then enable collection in Shopify.

Do Amazon sales count toward Shopify nexus thresholds? In most states, yes. Economic nexus thresholds are based on your total sales into a state across all channels, not just one platform. Your Amazon sales and Shopify sales typically both count toward the $100,000 threshold in a given state.

What is the difference between collecting sales tax and remitting it? Collecting means charging the customer at checkout. Remitting means filing a return and sending that money to the state. They are two separate steps. Many sellers collect correctly through Shopify but miss the remitting step because they don’t realize they need to file returns separately.

What happens if we’ve been collecting sales tax in a state but never filed? The money collected was held in trust for the state. You owe it, plus potential late filing penalties and interest. If your Shopify data is clean, you know exactly what was collected and can get current on filings without estimation. Get a nexus analysis done first so you understand the full scope before contacting any state.

Is a Voluntary Disclosure Agreement still available if a state has already contacted us? No. A VDA must be initiated before the state finds you. Once a state has sent a letter or opened a case, the VDA window closes. If you’ve already received contact from a state, there are still resolution options, but the reduced lookback and penalty elimination that come with a VDA are no longer available.

Know Where You Actually Stand

If this had you mentally running through your own Shopify settings or thinking about which states your FBA inventory might be sitting in right now, that instinct is worth following.

The sellers who end up in the most difficult situations are usually the ones who noticed that feeling and pushed it to the back burner.

The best first step is getting a real picture of where you stand across all your channels, not a rough guess.

We built a free Sales Tax Risk Assessment for exactly this:

20 questions, takes about five minutes.
Get your current risk level.
See a breakdown of what needs attention across your nexus footprint.
Walk away with a prioritized action plan.

It’s built for sellers doing $1M to $50M across multiple channels who aren’t completely sure they’re registered everywhere they should be.

Take the Free Sales Tax Risk Assessment →

Want to talk through your specific situation? LedgerGurus specializes in ecommerce sales tax for seven and eight-figure brands, including nexus analysis, registrations, VDAs, backfilings, audit support, and ongoing compliance. Reach out here.