Your Sales Tax Responsibilities as a Shopify Seller and How This Differs from Being a Marketplace Facilitator Seller Like Selling on Amazon

When selling online, understanding your sales tax obligations is crucial to staying compliant and avoiding costly penalties. As an e-commerce entrepreneur, your tax responsibilities vary depending on whether you’re selling through your own Shopify store or using a marketplace facilitator like Amazon. This article explores the key differences in sales tax responsibilities between these two selling models and how RJM Tax Exemption can help you navigate them effectively.

Sales Tax Basics for E-commerce Sellers

Sales tax is a consumption tax imposed by state and local governments on the sale of goods and services. In the U.S., sales tax regulations vary by state, and businesses must determine where they have nexus—a connection that obligates them to collect and remit sales tax. There are two primary ways an online seller can be responsible for sales tax:

1. As a Direct Seller – Selling through your own e-commerce store, such as Shopify.
2. As a Marketplace Seller – Selling through third-party platforms like Amazon, eBay, or Walmart Marketplace.

While both types of sellers may be required to collect and remit sales tax, the level of responsibility differs significantly.

Sales Tax Responsibilities for Shopify Sellers

Shopify operates as an e-commerce platform that enables businesses to create and manage their own online stores. Unlike Amazon or eBay, Shopify does not handle sales tax collection and remittance for its users. This means:

1. You Are Responsible for Sales Tax Collection
   • Shopify provides tools to set up tax collection, but it is the seller’s duty to configure these settings correctly.
   • You must determine where you have nexus and collect the appropriate sales tax rates for those states.
2. You Must Register for Sales Tax Permits
   • If you establish nexus in a state (through physical presence, economic activity, or inventory storage), you must register for a sales tax permit in that state before collecting tax.
   • Failure to register and collect sales tax where required can result in penalties.
3. You Must File and Remit Sales Tax
   • Shopify does not file sales tax for you, so you must regularly report and remit collected taxes to the relevant state agencies.
   • Tax filing frequency depends on state regulations and your sales volume.
4. Nexus Rules Affect Your Liability
   • Many states have economic nexus laws, meaning if your sales exceed a certain threshold (e.g., $100,000 in revenue or 200 transactions annually), you must collect sales tax in that state, even if you have no physical presence there.
   • States like California, Texas, and New York actively enforce these rules.

Sales Tax Responsibilities for Marketplace Sellers (e.g., Amazon, eBay, Walmart Marketplace)

Marketplace facilitators, such as Amazon and eBay, operate differently from standalone e-commerce platforms like Shopify. Since most states have enacted marketplace facilitator laws, the platform is often responsible for collecting and remitting sales tax on behalf of sellers. Here’s what that means for you:

1. Marketplace Facilitators Handle Tax Collection
   • Amazon, Walmart, and eBay automatically collect and remit sales tax in most states where marketplace facilitator laws exist.
   • This simplifies tax compliance for sellers, as they don’t need to manually collect taxes for orders placed through these platforms.
2. You May Not Need to Register in Every State
   • Since the marketplace handles tax remittance, sellers often don’t need to register for sales tax permits in states where they only sell via marketplaces.
   • However, if you also sell through your own website (e.g., Shopify), you may still need to register in states where you have nexus.
3. Reporting Requirements Still Apply
   • Even though Amazon collects and remits sales tax, you may still need to report your sales to state tax agencies.
   • Some states require sellers to file “zero returns” confirming that tax has been collected on their behalf.
4. Mixed Selling Models Complicate Compliance
   • If you sell both on Shopify and Amazon, your tax responsibilities differ by channel.
   • You may need to track and report marketplace sales separately from direct sales to ensure accurate tax filings.

Key Differences Between Shopify and Marketplace Sales Tax Compliance

How RJM Tax Exemption Can Help

Navigating sales tax laws can be overwhelming, especially for businesses selling across multiple channels. RJM Tax Exemption provides expert tax compliance services tailored to your unique selling structure. Here’s how we help:

1. Sales Tax Nexus Analysis

We assess your business activity to determine where you have tax obligations and guide you through registration requirements.

2. Automated Sales Tax Compliance

For Shopify sellers, we help set up automated tax collection tools and integrate compliance solutions to streamline filings.

3. Marketplace Compliance Advisory

If you sell on Amazon, Walmart, or eBay, we ensure that you meet your reporting obligations and avoid unnecessary tax liabilities.

4. Ongoing Monitoring & Updates

Tax laws change frequently. We provide ongoing support to keep your business compliant with evolving regulations.

5. Multi-Channel Tax Strategy

If you sell on both Shopify and marketplaces, we develop a cohesive tax strategy to minimize risk and maximize efficiency.

Conclusion: Stay Compliant & Focus on Growth

Sales tax compliance can be complex, but it doesn’t have to be a burden. Whether you sell on Shopify, Amazon, or both, understanding your responsibilities is crucial to avoiding penalties and ensuring smooth operations. By partnering with RJM Tax Exemption, you can navigate these complexities with confidence, allowing you to focus on growing your business.

Need help with sales tax compliance? Contact RJM Tax Exemption today to ensure your business stays on the right side of tax laws.