Wayfair v. South Dakota means you have economic nexus in any state where you crossed a sales threshold. Most dropshippers don't realize they're already non-compliant in 7 states.
A $300K Shopify store usually triggers nexus in 5-10 states. Voluntary Disclosure Agreements wipe the back-tax penalty if you raise your hand before the state catches you.
Most states: $100K in sales OR 200 transactions in a year. Some still use the lower threshold, some abandoned the transaction count. Shopify, Etsy, and Amazon don't collect for you in non-marketplace states. We map your gross-sales-by-ship-state and trigger registrations only where needed.
South Dakota v. Wayfair (2018); state economic-nexus statutesAmazon, eBay, Etsy, Walmart now collect and remit sales tax for you under marketplace facilitator laws. Shopify, BigCommerce, your own site, you collect. Same product on two channels = two different sales-tax flows on the same SKU. We build the matrix.
State marketplace facilitator statutes (post-2019)2024 third-party-network 1099-K threshold is $5,000 (down from $20K/200 tx, transitioning to $600 in 2026 per IRS Notice 2024-85). Stripe, PayPal, Shopify Payments will issue at $5K+. Reconciling 1099-K gross to your net taxable sales (returns, refunds, sales tax, processor fees) is where audits start.
IRC §6050W; IRS Notice 2024-85Printful, Printify, AliExpress, Spocket, your COGS is a real Schedule C line. Domestic suppliers paid >$600 may need a 1099-NEC if structured as services not goods. Foreign suppliers don't get a 1099 but you may need a W-8BEN on file. We sort the goods/services classification per supplier.
IRC §6041; §6050W; Treas. Reg. §1.1441-1If you carry any inventory (even just samples), §263A uniform capitalization may apply once gross receipts cross $30M (TCJA simplified small-business rule). True dropship (no inventory possession) usually escapes §263A. We document the no-inventory test.
IRC §263A; §471(c); Rev. Proc. 2018-40Net profit above ~$80-100K on Schedule C wastes SE tax. S-Corp election with reasonable salary + distribution split typically saves 8-12% of profit. We model breakeven against added admin cost (payroll, 1120-S, separate books).
IRC §1361; §1366; §1402; Rev. Rul. 59-221Client triggered economic nexus in CA, TX, NY, FL, IL, PA, and WA but had only registered in their home state. We filed Voluntary Disclosure Agreements in all seven, capped lookback at 3-4 years, and abated penalties on $48K of back sales tax (uncollected from customers, but client owed it).
$18,400 in penalties and interest abatedPlus forward-looking registration and Avalara/TaxJar integration so the same problem doesn't compound.
Quarterly review of gross sales by ship-to state vs. each state's threshold. Trigger registration only when crossing.
Stripe/PayPal/Shopify gross 1099-K reconciled to net taxable sales with returns, refunds, fees backed out.
Where you're already late, we negotiate the VDA with capped lookback and penalty waiver.
Form 2553 timing, reasonable comp study against industry data, Solo 401(k) layering.
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