Guide

Selling online: do you have to collect sales tax in other states?

If you ship to other states, sales tax is no longer just an Illinois question. Here is how it works in plain words.

General information only, not legal or tax advice. I am not a CPA or an attorney.

Why this changed

In 2018 the U.S. Supreme Court decided South Dakota v. Wayfair. States can now require an out-of-state seller to collect sales tax based on how much the seller sells into the state, even with no store or office there. This is called economic nexus.

When you owe tax in another state

• Economic nexus. Each state sets its own threshold. Many use $100,000 in annual sales into the state, and some also count a number of transactions. Thresholds differ, so check each state where you sell a lot.
• Physical presence. Keeping inventory in another state, for example in a warehouse or fulfillment center, or having employees or a storefront there, can create a duty to collect even at low sales.
• Registration comes first. A state generally expects you to register for a sales tax permit there before you collect tax from its buyers.

The Illinois rules

• A seller outside Illinois with no physical presence in the state must register and collect once Illinois sales reach $100,000 in a 12-month period.
• Illinois removed the old 200-transaction trigger on January 1, 2026, so the test is dollars only.
• If you ship any orders from inventory in Illinois, you are not a "remote retailer" and Illinois sales tax applies to your Illinois sales under the regular rules.

Marketplaces change the picture

When you sell through a marketplace such as eBay, Etsy or Amazon, the marketplace generally collects and remits sales tax on those orders. For Illinois, IDOR says a marketplace seller is not liable for Illinois retailers' occupation tax on those sales, as long as the marketplace has certified that it is collecting. Sales you make on your own website or in person are separate, and you handle those yourself. See selling on eBay.

A simple way to keep track

1. List where your own-website sales go, by state, each quarter.
2. Note where you store inventory.
3. When a state starts to look big, check that state's revenue department site for its threshold.
4. If you cross one, register there. A CPA can help with the choices.

Owing tax in another state is common for growing online sellers, and it is a good problem to have. It is manageable if you catch it early. The cost of ignoring it grows. See what to do if you fall behind.

I am not a CPA or an attorney

This page is general information, not legal or tax advice. Rules, fees and forms change, so confirm with the agency. For advice about your situation, talk to a CPA or an attorney.

Sources: Illinois ends transaction threshold (Sales Tax Institute); IDOR informational bulletin FY 2024-08. Checked Oct 27, 2026.