Multi-State Sales Tax Exposure: A Growing Liability for DTC Brands

Selling in 15 states? You may owe more than you think.

Sales tax compliance has grown significantly more complex in the years since economic nexus laws expanded across the country. Most states now require businesses to collect and remit sales tax once they exceed certain activity thresholds — commonly $100,000 in annual revenue or 200 transactions within that state. For DTC brands scaling nationally, this has created substantial exposure that many operators have not fully addressed.

A common misconception is that platforms like Shopify or Amazon handle all of a company’s sales tax obligations. While marketplace facilitator laws do shift responsibility for sales tax collection in certain scenarios, they do not cover all channels. Direct website sales, wholesale transactions, and certain subscription-based models often remain the company’s responsibility to manage.

The financial stakes are real. A $3 million DTC brand shipping to customers in 15 or more states could have triggered nexus in many of those states without realizing it. If the average effective sales tax rate is 7% and the company has not been collecting or remitting properly, the cumulative liability across multiple years could exceed $150,000 — before penalties and interest are factored in.

Best practice is to conduct a nexus study annually, implement automated sales tax solutions where transaction volumes justify the investment, and ensure exemption certificates are properly collected and maintained for all wholesale customers. State audit activity in this area has been increasing, with high-growth e-commerce brands drawing particular scrutiny.

Bottom Line: Sales tax is no longer a back-office administrative detail. It has become a growing financial liability that requires active management.