Marketplace Facilitator Laws: When Amazon and Shopify Collect Tax for You

A marketplace facilitator law makes the platform, not the individual seller, responsible for collecting and remitting sales tax on orders it processes for third-party sellers. If you sell on Amazon, Walmart Marketplace, eBay or Etsy, the marketplace collects tax on those orders in every state with such a law, and you do not report that tax yourself.

A marketplace facilitator is typically defined as a platform that lists or makes available a third party's products and either collects payment from the buyer or otherwise processes the sale. Every state with a statewide sales tax, plus the District of Columbia, has now enacted one; Missouri's, effective January 1, 2023, was the last. California's took effect October 1, 2019.

The platform owes collection once it meets the state's own threshold, counting all sales it facilitates. For a small seller this is a large simplification: $50,000 of Amazon sales spread over 30 states does not require 30 registrations. It does not remove every obligation, as the rest of this post explains.

Marketplace laws cover only marketplace orders. Sales through your own website, a retail location, wholesale accounts, or a storefront platform that does not process the sale as a marketplace are your responsibility in every state where you have nexus.

The common case is a DTC brand selling on Amazon and on its own Shopify store. Amazon handles Amazon orders. The brand must track nexus, register and collect on its Shopify orders on its own.

The key question is whether a state counts your marketplace sales toward your own nexus threshold, and states split:

• California counts them. CDTFA's Marketplace Facilitator Act guide says a seller must include sales facilitated through a marketplace, along with its direct sales, when testing the $500,000 threshold. A seller with only marketplace sales generally does not need to register.
• Texas counts them. The Comptroller requires all sales, including marketplace sales, in the $500,000 calculation. Its own example: $300,000 of website sales plus $300,000 of marketplace sales puts the seller over the line, so it must collect on the website sales.
• Alabama excludes them from the $250,000 test when a registered marketplace collects.

So a brand with $400,000 on Amazon and $200,000 direct into California is over the California threshold and must collect on its $200,000 of direct sales.

Fulfillment by Amazon creates a nexus problem that marketplace laws do not solve. When Amazon moves your inventory into a warehouse in a state, most states treat that stored inventory as physical presence, which creates nexus regardless of your sales volume there.

That physical nexus applies to your direct sales too. If Amazon holds your stock in a Texas fulfillment center, you have nexus in Texas for your own website orders even if your direct Texas sales are small. Amazon's marketplace status covers Amazon orders, not Shopify orders.

Seller Central's Inventory Event Detail report shows where your inventory has been. Pull it quarterly and compare it with your state registrations. A state where Amazon has held inventory but you are not registered for your direct channel is a gap worth closing.

Some brands consolidate inventory with a third-party logistics provider in one or two states to limit this footprint. The tradeoff is slower delivery or higher shipping cost to distant customers.

For a standard Shopify store, no. When you run your own storefront on Shopify, the sale is yours: Shopify provides software and payment processing, and you are the retailer responsible for sales tax. Do not assume Shopify collects and remits for you.

Shopify's tax settings calculate the right rate at checkout from the buyer's address. That is calculation, not remittance. You still register in each nexus state, file returns and pay the tax you collected, either yourself or through a filing service.

Some sales channels connected to Shopify can work differently, and states define "marketplace facilitator" in their own terms. If an order comes through a third-party marketplace channel, check that channel's tax terms and the state's definition rather than assuming either way.

For brands that sell mainly through their own Shopify store, marketplace laws provide no relief. You need full compliance: nexus monitoring, registration, rate calculation and filing.

Even when the marketplace collects, keep your own records and reconcile them. Marketplaces can apply the wrong product tax code, and a state reviewing your account can still ask you to show which sales were marketplace sales and which were direct.

What to keep for each state:

• Monthly or quarterly marketplace tax reports showing facilitated sales and tax collected by state
• Your direct-channel sales and tax collected by state, tied to your returns
• Exemption and resale certificates for wholesale customers
• Copies of every return filed

Retention periods vary by state, typically several years from the filing date and longer for periods where no return was filed. California's Regulation 1698, for example, requires at least four years.

If a nexus review shows you should have been collecting on direct sales in a state, register going forward and deal with the back periods through a voluntary disclosure agreement rather than waiting for the state to find you. Most states offer voluntary disclosure, which typically limits the lookback period and waives most penalties in exchange for registering and paying the back tax and interest.

A practical sequence:

1. Quantify the exposure by state: direct sales since nexus began, the tax you would have collected, and interest.
2. Decide whether to approach each state directly or through the Multistate Tax Commission's Multistate Voluntary Disclosure Program, which lets you negotiate with several member states through one process, anonymously at first.
3. Start collecting on new direct orders in those states as soon as you can, because voluntary disclosure generally covers only past periods.
4. Fix the root cause: add the state to your nexus tracker and turn on collection in your storefront's tax settings.

Timing matters. Voluntary disclosure is generally available only before the state contacts you about that tax, so a letter or questionnaire from the state usually closes the door.

A labelled example shows how the state rules combine. A brand has these annual sales:

California counts marketplace sales, so $600,000 exceeds the $500,000 threshold and the brand must collect on its $200,000 of Shopify sales. Texas totals only $250,000, below $500,000, but the FBA inventory is physical presence, so the brand must collect on its $100,000 of Shopify sales anyway. Alabama excludes marketplace-collected sales from its $250,000 test, leaving $50,000, so no direct-channel registration is needed on these facts.

For a brand selling on a marketplace, its own site and wholesale, we start with a nexus study that applies each state's rule on marketplace sales, adds FBA inventory locations, and dates when each obligation began. Then we register where needed, set up product tax codes for the direct channel, and reconcile marketplace reports against returns each quarter.

Rules in this post were checked against CDTFA, Texas Comptroller and Alabama Department of Revenue guidance in October 2026. States revise these definitions, so confirm the current rule for your states. This is general information, not tax advice for your specific facts.