Tax & Compliance · 2026-04-13
What Is Sales Tax Nexus — When Your Amazon FBA Inventory Creates Tax Obligations
Sales tax nexus means your business has a sufficient connection to a state that the state can require you to collect and remit sales tax. If you sell through Amazon FBA, your inventory is likely stored in warehouses across 20+ states — creating nexus in each one.
This article is for educational purposes only. It does not constitute tax advice. Consult a qualified tax professional for your specific situation.
The Tax Obligation Most E-Commerce Sellers Discover Too Late
If you sell physical products through Amazon FBA in the United States, there is a tax compliance issue that affects virtually every seller — and most discover it only after they have been selling for months or years. It is called sales tax nexus, and it determines which states can require your business to collect sales tax from customers.
The concept is straightforward in principle: if your business has a sufficient presence or connection in a state, that state considers you to have "nexus" there, and you are required to collect sales tax on sales to customers in that state. The complication is that Amazon FBA creates nexus in ways most sellers do not realize.
Understanding nexus is essential for any business selling physical products in the US, whether you formed your LLC in Wyoming, Delaware, or any other state. Your state of formation has almost nothing to do with where you owe sales tax. Nexus does.
Two Types of Nexus
States establish sales tax nexus through two primary mechanisms. Both can apply simultaneously, and for Amazon FBA sellers, both frequently do.
Physical Nexus
Physical nexus is the traditional form. Your business has physical nexus in a state if it has a tangible physical presence there. This includes:
An office, warehouse, or retail location
Employees working in the state
**Inventory stored in the state** — this is the critical one for FBA sellers
Equipment or property located in the state
If your products are physically sitting in a warehouse in Texas, you have physical nexus in Texas. It does not matter that you have never visited Texas, that your LLC is formed in Wyoming, or that you live in another country. The inventory creates the nexus.
Economic Nexus
Economic nexus is the newer form, established after the 2018 Supreme Court decision in South Dakota v. Wayfair. It is based on your sales volume or transaction count in a state, regardless of physical presence.
Each state sets its own thresholds. Common thresholds include:
**$100,000 in sales** to customers in the state during a calendar year, OR
**200 transactions** with customers in the state during a calendar year
Some states use only a dollar threshold. Some use only a transaction threshold. Some use both (you trigger nexus by exceeding either one). The thresholds vary by state.
If your total sales to customers in California exceed $500,000 in a year (California's threshold), you have economic nexus in California — even if you have no inventory or physical presence there.
Why Amazon FBA Creates Nexus Everywhere
Here is where it gets complicated for FBA sellers. When you send inventory to Amazon FBA, you do not choose which warehouse it goes to. Amazon distributes your inventory across its fulfillment network to optimize delivery speed. As of 2026, Amazon operates fulfillment centers in over 25 states.
This means your inventory could be stored in:
California, Texas, Florida, New York, New Jersey, Pennsylvania, Illinois, Georgia, Arizona, Washington, Ohio, Indiana, Kentucky, Tennessee, Virginia, North Carolina, Maryland, Massachusetts, Minnesota, Michigan, Nevada, Colorado, Connecticut, Oregon, Wisconsin — and more.
Each state where Amazon stores your inventory potentially creates physical nexus for your business in that state. You did not choose to put inventory there. Amazon did it automatically as part of its logistics optimization. But from the state's perspective, your property is physically present within their borders, and that is sufficient to establish nexus.
This is separate from economic nexus. Even if your sales to a particular state are well below the economic nexus threshold, having inventory stored there can still create physical nexus and a sales tax obligation.
Marketplace Facilitator Laws — The Partial Relief
There is a significant piece of relief for marketplace sellers. Most states have now enacted marketplace facilitator laws that require the marketplace itself (Amazon, in this case) to collect and remit sales tax on behalf of third-party sellers.
As of 2026, Amazon collects sales tax on behalf of sellers in all states that have a general sales tax and have enacted marketplace facilitator legislation. This covers the vast majority of states.
This means that for most of your Amazon sales, Amazon is already collecting the sales tax from customers and remitting it to the state. You might look at this and conclude: "Amazon handles it, so I have nothing to worry about." That conclusion is partially correct and partially dangerous.
What Marketplace Facilitator Laws Do Cover
Amazon collects and remits sales tax on sales made through the Amazon marketplace
This covers the collection and payment obligation for those specific transactions
You do not need to separately collect sales tax on Amazon marketplace sales
What Marketplace Facilitator Laws Do NOT Cover
**Sales tax registration** — many states still require you to register for a sales tax permit even if Amazon is collecting on your behalf
**Sales tax return filing** — having nexus in a state may require you to file returns even if your liability is zero (because Amazon already remitted the tax)
**Non-marketplace sales** — if you sell through your own website (Shopify, WooCommerce, etc.) in addition to Amazon, you are responsible for collecting sales tax on those sales in states where you have nexus
**Other tax obligations** — nexus for sales tax purposes may also trigger awareness of other state tax obligations, such as income tax filing requirements
The marketplace facilitator law handles the collection piece on Amazon transactions. It does not handle your registration, filing, and compliance obligations as a business with nexus in those states.
The Compliance Burden Is Real
Here is the practical reality for an Amazon FBA seller with inventory distributed across the network:
You potentially have nexus in 20+ states. For each state where you have nexus, you may need to:
1. Register for a sales tax permit in that state
2. File sales tax returns on the schedule the state requires (monthly, quarterly, or annually)
3. Report your sales even if the amount due is zero because Amazon collected it
For a seller with nexus in 25 states, that could mean 25 registrations and anywhere from 25 to 300 return filings per year (depending on filing frequency in each state). Missing a filing can result in penalties, even if no tax is owed.
This is the compliance bomb that catches most FBA sellers off guard. The actual sales tax collection on Amazon is handled. But the registration and filing obligations are yours.
States Without Sales Tax
Five states do not have a general sales tax:
Alaska (though some local jurisdictions do collect sales tax)
Delaware
Montana
New Hampshire
Oregon
Having inventory in these states does not create a sales tax nexus issue because there is no sales tax to collect. However, having inventory there may have other tax implications depending on the state.
Wyoming and Sales Tax
Since many readers have Wyoming LLCs, it is worth noting Wyoming's specific situation. Wyoming does have a state sales tax (4%, with local additions possible). If you have nexus in Wyoming — which you likely do if your LLC is registered and operating there — you may need to register for a Wyoming sales tax license and collect sales tax on sales to Wyoming customers.
However, if Amazon is collecting on your behalf through marketplace facilitator laws, the collection piece is handled for Amazon sales. You would still need to register and file in Wyoming if you have nexus there.
The fact that your LLC is formed in Wyoming does not affect your nexus in other states. Your Wyoming formation creates nexus in Wyoming. Your Amazon FBA inventory distribution creates nexus wherever Amazon stores your products.
Common Misconceptions
"My LLC is in Wyoming, so I only owe sales tax in Wyoming"
Wrong. Sales tax nexus is determined by where you have presence or activity, not where your LLC is formed. FBA inventory in California creates California nexus regardless of your LLC's state of formation.
"Amazon collects the tax, so I do not need to register anywhere"
Partially wrong. Amazon collects and remits the tax on marketplace transactions. But many states require you to register for a sales tax permit and file returns even when a marketplace facilitator is handling collection. Not registering can result in penalties.
"I am a foreign seller, so US sales tax does not apply to me"
Wrong. Sales tax nexus applies based on where you have physical presence or economic activity in the US. Your citizenship or country of residence is irrelevant. If your inventory is in US warehouses and you are selling to US customers, you have nexus.
"I will just wait until a state contacts me"
Risky. States are increasingly sophisticated at identifying sellers with nexus who have not registered. When they do contact you, the conversation often starts with back taxes, penalties, and interest for the period you should have been registered and filing.
What You Should Do
Sales tax compliance for FBA sellers is complex enough that it typically requires professional help. Here is the general approach:
1. Determine where you have nexus — identify which states Amazon stores your inventory in (Amazon provides inventory placement reports) and which states you exceed economic nexus thresholds in
2. Register for sales tax permits — in each state where you have nexus (consult a tax professional about which states actually require this given marketplace facilitator laws)
3. File sales tax returns — on the schedule each state requires
4. Monitor ongoing changes — Amazon moves inventory, your sales volumes change, and state laws evolve
Many sellers use specialized sales tax automation services that handle registration, calculation, filing, and reporting across all nexus states. These services typically cost a fraction of what manual compliance would cost in accounting time.
For considerations specific to Amazon FBA sellers choosing a state for their LLC, see Physical Address for Amazon FBA Sellers 2026. For a comparison of Wyoming and Delaware for e-commerce sellers, read Wyoming vs Delaware for Amazon Sellers 2026.
The Bottom Line
Sales tax nexus is not optional. If you have physical nexus through FBA inventory or economic nexus through sales volume, you have compliance obligations in those states. Marketplace facilitator laws have made the collection piece easier, but they have not eliminated registration and filing requirements.
The cost of getting ahead of this — registering, filing, and staying compliant — is manageable with the right tools and professional guidance. The cost of ignoring it — back taxes, penalties, interest, and potential audit exposure — compounds every month you delay.
This article is for educational purposes only. It does not constitute tax advice. Consult a qualified tax professional for your specific situation.