A Shenzhen home-storage seller I know got a letter from the Ohio Department of Taxation in the fall of 2023. Amazon's algorithm had moved his FBA inventory from California to more than twenty states. Ohio said: two years of inventory stored here, zero registrations, zero filings. Back taxes of $28,000, plus penalties and interest — a little over $40,000 total. His first reaction was disbelief. His company is in Shenzhen. The warehouses belong to Amazon. He never collected a cent of US tax. Why him?
One word: nexus. Once you understand it, that letter makes perfect sense.
The zero-threshold rule nobody reads
US sales tax is state-level, and every state writes its own rulebook. If you have enough "connection" to a state, you register, collect, and file there. Before 2018, connection mostly meant physical presence — an office, an employee, inventory. Then came South Dakota v. Wayfair in 2018, and states added economic nexus: hit $100,000 in sales or 200 transactions in a state (the majority-state formula; California uses $500,000 — always confirm current thresholds on each state's department of revenue site), and remote sellers owe tax too.
Here is the part most sellers miss. Economic nexus is "sell enough and you owe." Physical nexus is "have goods there and you owe." Inventory sitting in a warehouse in any state — an Amazon FBA building, a third-party 3PL, or a 500-square-foot unit you leased yourself — creates physical nexus. The threshold is zero. One unit counts. The obligation starts the day goods arrive, regardless of whether you ever hit the $100,000 line.
Amazon moves your goods; the states count the moves
FBA's "passive redistribution" is the classic trap. Amazon shifts your inventory between fulfillment centers and you get little or no notice. Wherever the goods land, nexus follows. A pet-supplies seller pulled his FBA inventory reports for 2024 and found his products had sat in 31 states. He had registered in California only. In the other 30, he theoretically owed registration and filings from day one. He told me his hands went cold reading that report — not because he was evading tax, but because he had no idea he was "in" those states at all.
Your 3PL's records are the state's evidence
Many sellers assume inventory at a 3PL "doesn't count" because the building isn't theirs. Tax authorities disagree: the goods are yours; the warehouse is just holding them. I know a 30,000-square-foot Chinese-run 3PL in Southern California that received a records request from a state revenue department in 2023 — not a bluff, a real records request. Your inbound receipts and slot locations live in their WMS. That paper trail is discoverable, and it names you.
The same logic covers a returns-processing unit you lease in New Jersey or Delaware. Lease agreements, utility bills, the address on return labels — that's an evidence chain. Physical nexus doesn't require "active operations." Passive storage counts. Plenty of sellers insist a returns warehouse "isn't sales." The state looks at where the inventory physically sits, not at your business rationale.
One more nuance that confuses people: marketplace facilitator laws. On Amazon or Walmart's marketplace, the platform collects and remits sales tax for you — that part is handled. But facilitator laws cover the transaction, not your physical presence. Having inventory in a state can still trigger registration, filing, and even income-tax nexus obligations that the marketplace does nothing about. I have met sellers who assumed "Amazon handles tax" meant they had zero obligations in 30 states. It meant they had zero collection obligations. The registration and filing obligations were still theirs, quietly accumulating.
The seven-day cleanup that actually works
There is no "wait and see" option here — penalties compound monthly, and the hole gets deeper every quarter. But one focused week gets you to solid ground.
Pull your footprint first. Download 12 months of FBA monthly inventory reports and list every state your goods touched. Ask your 3PL account manager for storage records. One sheet of paper, every state named. That's your nexus map.
Then sort states into two buckets. States with inventory: physical nexus, register, no exemptions to argue about. States with remote sales only: check each state's economic nexus threshold on the official revenue site, register where you're over the line, and re-check the rest quarterly. Keep a simple spreadsheet — state, first inventory date, registration date, filing frequency. When a state auditor calls two years later, that spreadsheet is worth more than your memory.
Register before the state finds you. Most states let you register online, free to a few dozen dollars, with the license issued in one to two weeks. If you already owe back years, talk to a tax professional about a VDA — a voluntary disclosure agreement — first. Many states waive most penalties for sellers who come forward voluntarily; once the state contacts you, that discount is gone. I have seen a VDA compress a potential $60,000 penalty exposure into just over $10,000. Same back taxes, different order of operations, wildly different outcome.
One more detail that bites people: registration means filing. Zero sales still means zero returns filed on time. Unfiled returns draw penalties that can exceed the tax itself. I watched a seller register in 12 states, file in the 5 with sales, and get penalty notices from the other 7 one after another. Set calendar reminders for every filing frequency — monthly, quarterly, annually — the day you register, not the day the first notice arrives.
Finally, bake tax into your network design. I keep meeting sellers who spread inventory across 8 states to save $0.30 per order on freight, then spend $20,000-plus a year on multi-state compliance and filings — before counting any back-tax risk. Warehouse placement is arithmetic, and tax is one of the terms. Review the map every quarter, because Amazon's network shifts and your nexus map shifts with it. Don't let the state do the math for you.
