Marketplace sales from the UK into the US: When the seller is still liable for sales tax

• Marketplace collection does not equal full compliance. Facilitator laws often shift collection and remittance to the platform, but registration, filing, notice responses, and record-keeping obligations can still remain with the seller.

   

• Hybrid sellers carry higher risk. If you sell through a marketplace and directly via Shopify or another DTC channel, economic nexus thresholds may still require you to register and collect tax on your own sales.

   

• U.S. inventory can independently create nexus. Holding stock in FBA or a U.S.-based 3PL can establish physical presence nexus, even if the marketplace handles tax collection on its platform.

   

• State rules vary and evolve. Marketplace facilitator laws differ by state and can change. Obligations must be assessed based on your specific channels, inventory footprint, and state-level revenue.

Marketplace facilitator laws require certain platforms — such as Amazon, eBay, Etsy, and Walmart Marketplace — to collect and remit U.S. sales tax on behalf of third-party sellers for transactions made through their marketplace.

This usually means that when a U.S. customer places an order on the platform, the marketplace calculates the applicable state and local sales tax, collects it from the customer at checkout, and remits it directly to the relevant state.

This can give the seller the impression that all things U.S. sales tax have been “taken care of”. However, these laws primarily shift collection and remittance responsibility for marketplace transactions. They do not automatically eliminate all seller obligations.

State rules vary. Some states still expect sellers to register if economic or physical nexus exists. Others may require informational filings, notice responses, or retention of transaction-level documentation. In hybrid selling models — where a U.K. business sells both through a marketplace and directly via its own website — obligations can differ by channel.

Marketplace collection also depends on accurate product set-up and classification. If taxability is incorrect at listing level, the marketplace’s calculation may also be incorrect.

Because marketplace facilitator laws differ by state and can evolve, U.K. sellers should confirm their obligations in each U.S. jurisdiction where they have sales or inventory. Assuming that marketplace collection resolves all U.S. sales tax risk is often the first — and most expensive — misunderstanding.

Marketplace collection does not eliminate nexus. It shifts who collects tax on marketplace transactions. Liability, registration obligations, and broader compliance exposure can still remain with the seller.

Below are the most common scenarios where U.K. marketplace sellers remain responsible.

Hybrid seller: You have direct sales as well as marketplace sales

If you sell through Amazon but also through Shopify or another direct to consumer (DTC) channel, your obligations change.

Economic nexus thresholds in most U.S. states are based on gross revenue into the state. Depending on the state, this may include marketplace sales when determining whether the threshold has been exceeded.

Even if Amazon collects tax on Amazon orders, your Shopify sales into that same state may require you to register for U.S. sales tax, collect tax on direct transactions, and file returns.

As an example: Amazon collects and remits tax on marketplace sales in California. But if you also generate $120,000 in direct Shopify revenue into California, you may be required to register and collect on those direct sales.

Marketplace collection does not remove your responsibility for your own channel.

You store inventory in the U.S.

Inventory in the U.S. can create physical presence nexus — regardless of whether the marketplace collects tax. This includes Amazon FBA stock, inventory held by a third-party logistics (3PL) provider, and warehouse arrangements.

FBA introduces additional complexity because inventory can be placed across multiple states automatically. Sellers often discover they have nexus in several states due to inventory movement alone.

Even if the marketplace collects tax on its platform, some states may still require registration where physical presence exists. Inventory location also increases the likelihood of state correspondence or audit review.

The state law requires the seller to register or file

In certain states, marketplace sellers may still be expected to register or file informational returns depending on their sales profile. Some states may require:

• Registration once economic nexus is exceeded

• Filing of returns even where tax due is zero

• Confirmation of marketplace facilitator status

Because rules differ and evolve, U.K. sellers should confirm the specific expectations of each state in which they have revenue or inventory.

You make exempt or B2B sales through a marketplace

If you sell to resellers or tax-exempt entities, documentation becomes critical. Marketplace platforms may facilitate exemption processing, but sellers are often still responsible for ensuring exemption certificates are valid and retained properly.

If documentation cannot be produced during audit, the state may hold the seller liable for the tax — even if the customer claimed exemption at checkout.

Exempt sales are therefore not “risk free” simply because they occurred on a marketplace.

Product taxability is incorrect

Marketplace collection is only accurate if the product is classified correctly. Taxability rules vary by state. Clothing, digital goods, subscriptions, shipping charges, and bundled items can all be treated differently depending on jurisdiction.

If a product is misclassified, the marketplace may collect too little or too much tax. U.K. sellers should not assume uniform treatment across states.

Correct product set-up and tax code mapping remain the seller’s responsibility.

Returns, refunds, and credits aren’t reconciled correctly

Marketplace reports must be reconciled with internal records.

Returns and refunds can affect taxable totals. If refund adjustments are not aligned with state reporting, discrepancies can arise during audit or notice review.

Operationally, sellers should retain detailed marketplace tax reports and reconcile them monthly against sales and return data.

You receive notices from states — even when the marketplace collects

States conduct data matching using sales information, inventory location data, and address records. A U.K. seller may receive a nexus questionnaire or registration notice even if a marketplace is collecting tax. This can occur because:

• Inventory exists in the state

• Economic thresholds appear to have been exceeded

• Sales are visible through third-party reporting

• State records do not reflect facilitator status

Notices should not be ignored. Sellers should document marketplace facilitator coverage, confirm whether registration is required, and respond promptly.

Marketplace collection helps — but it does not eliminate seller responsibility. Nexus, registration, filing expectations, inventory presence, product classification, and documentation remain active risk areas for U.K. businesses selling into the U.S.

One of the biggest sources of confusion for U.K. marketplace sellers is the assumption that if a marketplace collects U.S. sales tax, the seller has no further obligations. In practice, three separate concepts must be understood: registration, filing, and liability.

Registration means obtaining a U.S. sales tax permit from a state. It establishes that you are recognised by the state tax authority and may carry ongoing compliance obligations. Registration is typically triggered when nexus exists — whether through economic thresholds or physical presence such as inventory.

Filing refers to submitting periodic sales tax returns. Even where a marketplace collects and remits tax, some states may still expect sellers to file informational returns or zero returns, depending on their sales profile and nexus status.

Liability concerns who the state holds responsible if tax was not collected or remitted correctly. Marketplace facilitator laws often shift collection responsibility for marketplace transactions to the platform. However, this does not automatically remove liability related to direct sales, misclassified products, missing exemption certificates, or unregistered activity.

These distinctions matter because marketplace collection can address one element — collection on marketplace transactions — without eliminating the others. A seller may not owe tax on Amazon sales, but may still need to register due to inventory, file returns due to hybrid selling, or respond to state notices.

Clarity between registration, filing, and liability is essential for U.K. businesses navigating U.S. sales tax obligations across multiple states.

Marketplace facilitator laws are widespread across the U.S., but the details vary by state. Economic nexus thresholds, registration expectations, and inventory treatment can all differ. Below is a high-level illustration of how several key states approach marketplace selling.
 

California

California’s high economic nexus threshold ($500,000) can give U.K. sellers a false sense of security. However, FBA inventory in California creates physical presence nexus regardless of revenue. Hybrid sellers with both Amazon and Shopify sales must consider registration if direct sales exist.

Texas

Texas applies a $500,000 threshold but monitors remote sellers closely. Even where a marketplace collects tax, direct sales and inventory can create separate obligations. Sellers should also expect timely notice follow-up if they appear to exceed thresholds.

New York

New York’s combined revenue and transaction threshold means mid-volume sellers can trigger nexus even before hitting large revenue figures. Product taxability accuracy is important, particularly for digital or bundled goods.

Florida

With a $100,000 economic threshold, Florida frequently becomes one of the first states where U.K. sellers exceed nexus. Marketplace collection may apply, but direct sales into Florida can quickly require registration.

Illinois

Illinois includes a 200-transaction test. This means sellers with moderate revenue but high order volume may cross the threshold unexpectedly. Hybrid sellers need careful tracking.

Washington

Washington applies economic nexus at $100,000 and has historically taken an assertive enforcement stance. Even where marketplace collection applies, registration and reporting expectations should be confirmed.

State rules change, and the above examples are illustrative rather than exhaustive. U.K. sellers should monitor thresholds carefully, confirm how marketplace facilitator laws interact with hybrid sales and inventory in each jurisdiction, and look out for common mistakes.

“The marketplace collects, so we’re fully covered.”

Marketplace facilitator laws often mean the platform collects and remits tax on marketplace transactions. That helps — but it does not automatically eliminate all seller obligations. You may still need to:

• Register in certain states
   

• File informational or zero returns
   

• Monitor economic nexus thresholds
   

• Manage exemption documentation
   

• Collect tax on direct (non-marketplace) sales

Marketplace collection typically covers collection and remittance for marketplace transactions. It does not automatically remove registration, filing, or documentation responsibilities.

“We don’t have a U.S. entity, so U.S. sales tax doesn’t apply.”

U.S. sales tax is not based on incorporation. It is based on nexus. If you exceed an economic threshold in a state, store inventory there, or create physical presence through fulfilment arrangements, you can trigger obligations — even as a U.K. company with no U.S. subsidiary.

“We can register later if we get big.”

Waiting until you are “large enough” is risky. Economic nexus thresholds are state-specific and often lower than expected. Once crossed, obligations can apply from that date — not from when you choose to register.

Late registration may expose you to retroactive liability, penalties, and interest. Ongoing monitoring is significantly cheaper than remediation.

For U.K. marketplace sellers, the more accurate mindset is: Marketplace laws reduce some collection burden — they do not eliminate responsibility.

Marketplace collection simplifies part of U.S. sales tax compliance — but it does not remove the need for structured oversight. U.K. sellers using marketplaces should take deliberate, documented steps to reduce exposure.

Start by mapping your sales channels. Are you marketplace only, or are you hybrid — selling both through Amazon/eBay/Etsy and directly via Shopify or another DTC platform? Hybrid models introduce separate obligations that must be assessed state by state.

Next, confirm your inventory footprint. If you use FBA or a U.S.-based 3PL, identify where stock is physically stored. Inventory movement can create nexus in multiple states without active decision-making.

Track revenue by state monthly. Understand whether marketplace sales count towards economic nexus thresholds in your situation and whether direct sales independently trigger registration.

Review marketplace tax reports and reconcile them with your internal sales data, including returns and refunds. Documentation should be retained and aligned with reporting records.

Assess whether registration is required in any state based on revenue, inventory, or hybrid sales. This should be evaluated individually for each state.

Set a cadence for review. A quarterly nexus assessment — with documented decisions — reduces the risk of retrospective exposure.

Finally, maintain exemption documentation where applicable. If you sell to resellers or exempt entities, certificates must be retained and validated.

Marketplace selling does not remove compliance responsibility. It changes how that responsibility must be managed.

An expensive mistake is assuming that marketplace collection equals full compliance. For some U.K. sellers, marketplace-only activity in a limited number of states may be manageable internally. But complexity increases quickly when you are:

• Selling into five or more states
   

• Operating a hybrid model (marketplace + direct/DTC)
   

• Holding inventory in FBA or multiple 3PL locations
   

• Approaching or frequently crossing economic nexus thresholds
   

• Operating with limited in-house tax bandwidth

At that point, monitoring nexus manually and reconciling marketplace data in spreadsheets becomes risky. A U.S. sales tax compliance partner can help to bring structure and visibility across your U.S. footprint. This typically includes:

• Automated nexus tracking by state
   

• Support with multistate registrations
   

• Real-time rate and product taxability determination
   

• Automated return preparation and filing
   

• Exemption certificate management
   

• Audit-ready reporting and documentation

Avalara supports U.K. businesses selling into the U.S. by centralising these functions within a single compliance framework. By integrating with ecommerce platforms, ERPs, and marketplaces, Avalara helps sellers monitor thresholds, apply accurate rates, manage registrations, and file returns consistently — without expanding headcount.

If you’re scaling across U.S. states or unsure whether marketplace collection fully covers your obligations, speak to Avalara about U.S. sales tax for U.K. sellers and assess where your exposure stands today.