When Does a Canadian Online Store Have to Start Worrying About US Sales Tax?
A Canadian online store needs to start taking US sales tax seriously once it crosses a US state's "economic nexus" threshold — most commonly USD $100,000 in sales or 200 transactions into that state in a calendar year. You don't need a US warehouse or office to owe it; selling into a state in volume is enough.
The Post-Wayfair Reality: Physical Presence Is No Longer the Threshold
Before 2018, the rule was simple: if you had no US office, warehouse, or employee, you had no US sales tax obligation. That ended with the US Supreme Court's South Dakota v. Wayfair decision.
Today, every US state that has a sales tax (that's 45 states plus Washington D.C.) can require any seller — including Canadian businesses — to collect and remit sales tax once that seller hits the state's economic nexus threshold. Your Canadian incorporation is irrelevant. What matters is how much you're selling into each state.
What "Economic Nexus" Actually Means for Your Numbers
Most states set their threshold at:
- USD $100,000 in gross sales into the state, or
- 200 separate transactions into the state
…within a rolling 12-month or calendar year period.
A few states are stricter. For example, California's threshold is $500,000 in sales. A handful of smaller states use transaction counts alone. The rules aren't perfectly uniform, which is part of what makes this genuinely complicated.
The practical implication: if you're a Canadian Shopify seller doing $2M+ CAD per year and US buyers represent even 20–30% of your revenue, you are almost certainly over the threshold in multiple states already.
Physical Nexus Still Applies Too
If you store inventory in the US — including in an Amazon FBA warehouse — you have physical nexus in that state from day one, with no threshold to cross. This catches a lot of Canadian hybrid sellers off guard. Enrolling in FBA means Amazon may be placing your products in fulfillment centres in California, Texas, Pennsylvania, and others simultaneously.
The Marketplace Facilitator Wrinkle (Good News, Partly)
Most major marketplaces — Amazon, Etsy, eBay — are now classified as marketplace facilitators under US state law. That means they collect and remit sales tax on your behalf for sales made through their platform. You generally don't have to register or remit for those specific sales.
The catch: those marketplace sales still count toward your economic nexus threshold in most states. So a seller doing $80K directly through their Shopify store plus $60K through Amazon could still be over the $100K threshold in a state — and now owe tax on the Shopify portion.
When Should You Actually Act?
Here's a practical trigger framework:
- Under $50K USD total US sales: Monitor, document by state, don't panic yet.
- $50K–$100K USD into any single state: Get a nexus analysis done. Know exactly where you stand.
- Over $100K USD into any single state, or 200+ transactions: You are likely required to register, collect, and remit in that state. The clock is already running.
Note that states can assess back taxes, interest, and penalties for periods when you were over threshold but unregistered. Voluntary disclosure programs exist in many states to reduce those penalties — but they require proactive action.
This Is a Cross-Border Problem, Not Just a Tax Problem
For Canadian e-commerce owners doing meaningful US volume, US sales tax compliance is a real cost of doing business south of the border. Registering in multiple states, filing returns on different schedules, and reconciling marketplace-facilitated sales vs. direct sales is genuinely complex work.
This is exactly the kind of multi-platform, cross-border tangle that SGML Accounting works through with Canadian e-commerce clients — mapping where nexus exists across Shopify, Amazon, and other channels, and building a compliance picture that won't surprise you at the worst possible time.
Disclaimer: This article is for general educational purposes only and does not constitute legal or tax advice. US sales tax rules vary by state and change frequently. Consult a qualified cross-border tax professional for advice specific to your business.
Frequently asked questions
Does a Canadian business with no US address still have to collect US sales tax?
Yes. Since the 2018 Wayfair ruling, US states can require foreign sellers — including Canadian businesses — to collect sales tax based purely on sales volume into that state, regardless of whether you have any US physical presence.
Does selling on Amazon Canada count toward US sales tax thresholds?
No — sales made to Canadian customers through Amazon.ca don't count. What matters is sales shipped to US addresses. However, if you're enrolled in Amazon FBA and your inventory sits in a US fulfillment centre, you have physical nexus in that state immediately, with no dollar threshold.
If Amazon collects sales tax on my behalf, do I still need to register in US states?
For your Amazon sales specifically, you generally don't need to register because Amazon acts as a marketplace facilitator. But if you also sell directly (e.g., through your own Shopify store) and your combined US sales cross a state's economic nexus threshold, you may need to register and collect on those direct sales.
What happens if a Canadian seller has already crossed US nexus thresholds but never registered?
The state can assess back taxes, interest, and penalties for the period you were over threshold. Many states offer Voluntary Disclosure Agreements (VDAs) that cap lookback periods and reduce penalties — but you need to act proactively before the state contacts you first.
How many US states would a typical Canadian e-commerce seller need to register in?
It varies enormously by where your customers are. A seller doing $3M CAD with 40% US revenue could realistically have nexus in 5–15 states depending on order distribution. A proper nexus study — mapping your transaction data by state — is the only way to know for certain.
US sales tax rules vary by state, change frequently, and depend on the specifics of your business. This is general education — not legal or tax advice. Talk to a qualified cross-border tax professional about your situation before making any compliance decisions.