Can Using Two LLCs Help Limit Sales Tax Nexus for Ecommerce Sellers?
If you are selling on Amazon FBA AND Shopify, you need to be aware that storing goods in Amazon FBA warehouses triggers sales tax Nexus. Amazon can very quickly send all your goods all over the U.S., meaning you now need to think about sales tax registration and sales tax compliance for the Shopify store.
So, is it possible to use two LLCs to help limit state sales tax Nexus exposure?
Short answer– Potentially, but it needs to be done correctly.
What’s the Difference Between Amazon and Shopify?
When considering sales tax, the main difference is
- Amazon is a marketplace facilitator, which means they must collect and remit sales tax for all states on you, or your LLCs, behalf. Some states do not require you to register if you reach Nexus through Amazon FBA warehouses and ONLY sell on Amazon. Sales tax returns are much simpler if only reporting
- Shopify is a platform to build your own ecommerce business, they do not collect and remit sales tax on our behalf. You must set up your tax settings manually.
Why a Business Would Consider 2 LLCs
When you use Amazon FBA, they will store goods in Amazon warehouses all over the US, creating physical Nexus. You would then need to be registered and collect sales tax on your Shopify store.
You would find that you need to register and file for 30 states very quickly which takes a lot of time OR a big monthly fee if paying someone to do it for you.
Businesses consider 2 LLCs so they can keep the nexus tax exposure low so they don’t need to register to states when selling on Shopify until they reach the much higher economic nexus thresholds.
Where can Things Go Wrong?
It’s not as simple as just opening a second ecommerce LLC to avoid the state tax nexus obligations, here’s where things could go wrong:
1. Common Ownership
If both LLCs are owned by the same person or entity, some state tax laws treat them as one unit — especially if there’s functional overlap.
2. Operational Overlap
If the businesses share:
- Employees or contractors
- Bank accounts or marketing platforms
- Warehousing or inventory
…states may argue there’s no true separation. That opens the Shopify store up to the same nexus.
3. Marketing & Data Sharing
Promoting your Amazon listings on your Shopify site, using shared email lists, or unified branding can blur the lines legally.
When It Can Work
This strategy to limit state sales tax nexus may be viable if:
- Each LLC has separate EINs, bank accounts, merchant processors, websites, and branding
- You maintain true operational separation
- You’re prepared for double the compliance (filings, bookkeeping, tax prep)
Done right, it’s a clean firewall.
Important
If you are just wanting to sell the exact same products you sell on Amazon, with the same branding, on a Shopify store, it’s unlikely to work in your favor by just opening another LLC. But if it’s potentially a separate branch of your business, that can be separated operationally, it may be a viable option.
Other Option- Avoiding Amazon FBA
Amazon FBA offers a significant amount of benefits. With fulfillment management, faster shipping and multi channel fulfilment. But there are now more and more 3rd party fulfillment partners who could assist your businesses needs.
Many of these 3PLs only store goods in 3-5 states and can still fulfill your orders very quickly. It may be an option to use these instead, to avoid Amazon’s Nexus footprint and keep your sales tax compliance relatively manageable and costs lower.
Final Thoughts
While splitting your ecommerce business into 2 LLCs to limit the state tax nexus may be viable, it’s essential that you make sure they have true operational separation, otherwise you may have ended up making the business structure even messier just for the states to deem your businesses to overlap. Some states, such as California and New York, are very strict when it comes to operational overlap. If you are unsure, don’t mess around with tax stuff. Reach out to RJM for free sales tax Nexus surveys and multistate sales tax compliance packages to suit each business’s needs.
