A Canadian Shopify seller must collect US sales tax in any state where it has nexus, which means either physical presence such as inventory or staff in the state, or economic nexus from selling more than that state's threshold, often around $100,000 a year, into it. Being based in Canada does not exempt you. With BFCM approaching and US demand growing for Canadian manufacturers, wholesalers, and DTC brands, the practical move is to total your US sales by state now, check them against each state's rule, and register before you cross a line. Thresholds and rules change, so confirm current numbers with the state or a tax professional.
The Quick Answer
- Total sales by state: export 12 months of US orders from Shopify
- Check physical presence: inventory, staff, and events in each state
- Compare to thresholds: alert at about 80 percent of each state's limit
- Register, then collect: register with the state, then enable collection in Shopify
- Document wholesale: keep resale certificates for tax-exempt US buyers
This guide covers US state sales tax. For Canadian GST, HST, and PST, see our Shopify tax compliance guide.
Types of Nexus Compared
| Type | What Triggers It | Example |
|---|---|---|
| Economic nexus | Sales or order volume into a state passes its threshold | Roughly $100,000 in annual sales into a state, or $500,000 in larger states such as California and Texas |
| Physical nexus: inventory | Stock held in a state | US 3PL warehouse, Amazon FBA, or a consignment location |
| Physical nexus: people | Employees, reps, or contractors working in a state | A field sales rep or installer based in the state |
| Physical nexus: events | Temporary presence in a state | Selling at a trade show or pop-up |
| Marketplace facilitator rules | Sales made through a marketplace | The marketplace collects the tax, but your direct sales still count |
Why it matters: physical nexus can start with your first dollar of sales, while economic nexus only starts at a threshold, so a store with no US sales volume can still owe tax if it holds stock in a US warehouse.
1. Economic Nexus After Wayfair
Before 2018, a seller generally needed a physical presence in a state to be required to collect its sales tax. The US Supreme Court's decision in South Dakota v. Wayfair changed that, and states quickly adopted economic nexus rules based on sales or transaction counts. Many use $100,000 in annual sales into the state, some pair it with 200 transactions, and larger states such as California and Texas use $500,000. Several states have dropped the transaction test, and each sets its own measurement period, so a single rule of thumb is not safe.
The rules apply to remote sellers regardless of country. A Fredericton manufacturer shipping direct to US consumers is treated like a seller in any other state or country. Tariffs and duties are a separate layer, covered in our cross-border tariffs guide and the DDU and DDP guide.
Why it matters: crossing a threshold without registering can leave you owing tax you never collected from customers, plus penalties and interest, so tracking by state is cheaper than back-filing.
2. Physical Nexus: Inventory, People, and Events
Most Canadian sellers cross physical nexus by accident. Moving stock to a US fulfilment partner to shorten delivery times is the usual trigger, because inventory in a state is generally treated as presence there. Sending a rep to install equipment, hiring a remote employee, or selling at a US trade show can do the same. Check where your stock actually sits, especially if you use a 3PL that spreads inventory across several warehouses, or Amazon FBA, which can distribute your stock to many states.
Why it matters: a decision made for shipping speed can create a tax registration obligation in a new state, so involve your accountant before stock moves across the border.
3. Wholesale, Resale Certificates, and Marketplaces
Sales to US businesses that resell your goods are often exempt, but only if you hold a valid resale or exemption certificate from the buyer. Capture it at account approval, store it on the company record, and tie it to the Shopify B2B customer so tax is not charged on qualifying orders. Our guide to resale certificates for Shopify B2B covers the document workflow for Canadian provincial exemptions, and the same discipline applies to US states.
Marketplace sales work differently. In most states, marketplace facilitator laws put collection on the marketplace for orders it processes. That does not remove your obligation on direct Shopify orders, so count those sales separately when you check thresholds.
Why it matters: an undocumented tax-free wholesale sale is treated as taxable in an audit, and mixing marketplace and direct sales hides how close you really are to a threshold.
4. Which AtlanticWorks Guide Answers Your Problem
Cross-border selling involves several different tax and trade questions. Use this table to find the right starting point.
| If your problem is | Read |
|---|---|
| You sell into the US and need to know when you must collect state sales tax | This article: US sales tax nexus |
| You need to set up GST, HST, and PST on Shopify for Canadian customers | Shopify Tax in Canada: GST, HST, and PST Compliance |
| You are worried about tariffs and duties on goods crossing the border | Cross-Border Ecommerce and Tariffs for Canada and the US |
| You are deciding who is importer of record for US orders | Shopify Managed Markets: DDU vs DDP |
| Your wholesale buyers claim resale exemptions | Resale Certificates and PST Exemption for Shopify B2B |
Why it matters: sales tax, duties, and importer of record are separate obligations, and fixing one does not solve the others.
Monitoring Checklist
Six steps that keep a lean team ahead of US sales tax obligations.
Export US sales by state.
Pull the last 12 months of orders from Shopify and total sales and order counts by shipping state. Separate taxable retail sales from exempt wholesale sales.
Map your physical footprint.
List every US state where you hold inventory, including 3PL and FBA locations, and where employees, reps, or contractors work.
Compare against each state's threshold.
Check the current economic nexus rule for every state where you are close, and set an internal alert at about 80 percent of the threshold so you can register before you cross it.
Register, then configure Shopify.
Register with the state revenue department first, then turn on tax collection for that state in Shopify so checkout starts charging the correct rate.
Collect exemption certificates for wholesale.
Store a valid resale or exemption certificate against each US business customer so tax-free wholesale orders are documented if a state audits you.
Assign filing to a person or service.
Decide who files and remits in each state, and on what schedule. Shopify collects tax but does not file returns for you.
Why it matters: a quarterly check takes an hour and is far cheaper than a multi-state back-filing project after a state notice.
How AtlanticWorks Helps
AtlanticWorks is not a tax firm, and we work alongside your accountant. As a certified Shopify, HubSpot, Google, and Salesforce partner, we set up Shopify tax collection and markets for US selling, build the state-by-state sales reporting that shows how close you are to each threshold, connect Shopify to your accounting system, and store exemption certificates on HubSpot company records for wholesale buyers. The free assessment is the fastest way to see where your US selling setup has gaps.
Key Takeaways
- US states can require a Canadian seller to collect sales tax. Being based in Canada does not exempt you once you have nexus.
- Economic nexus is triggered by sales into a state, often around $100,000 a year, with higher thresholds in larger states. Confirm current numbers for every state.
- Physical nexus is separate and can start at the first dollar: US inventory, employees, or trade show sales can all create it.
- Marketplace facilitators often collect tax on marketplace orders, but your own Shopify sales from the same state may still be your responsibility.
- Wholesale sales are often exempt with a valid resale certificate. Collect and store one for every US business buyer.
- Shopify calculates and collects tax once configured, but registration and filing stay with you, so assign an owner before you cross a threshold.
Frequently Asked Questions
What is sales tax nexus?
Sales tax nexus is a connection between a seller and a US state that gives the state the right to require the seller to register, collect, and remit sales tax. Nexus can be physical, such as inventory, employees, or an office in the state, or economic, based on how much you sell into the state.
What is economic nexus?
Economic nexus means a state can require an out-of-state seller to collect sales tax once its sales into the state pass a set threshold, even with no physical presence. Since the 2018 US Supreme Court decision in South Dakota v. Wayfair, nearly every state with a sales tax has adopted an economic nexus rule.
Do Canadian businesses have to collect US sales tax?
They can, yes. US states do not exempt a seller because it is based in Canada. If a Canadian business crosses a state's economic nexus threshold or has physical nexus, such as inventory in a US warehouse, that state can require it to register and collect sales tax on taxable sales to customers there.
What are typical economic nexus thresholds?
Many states use $100,000 in annual sales into the state, and some add a count of 200 transactions, although a growing number have dropped the transaction test. Larger states such as California and Texas use $500,000. Thresholds and measurement periods change, so confirm each state's current rule before relying on a number.
Does storing inventory in a US 3PL or Amazon FBA create nexus?
Usually yes. Inventory held in a US state, including in a third-party logistics warehouse or Amazon fulfillment centre, is generally treated as physical presence in that state. Marketplace facilitator laws often make the marketplace collect tax on marketplace sales, but your own direct sales from that inventory may still need collection.
Is wholesale to US businesses subject to sales tax?
Often not, if the buyer provides a valid resale or exemption certificate. Selling for resale is generally exempt, but you must collect and keep the right certificate for each state. Without it, the state can treat the sale as taxable. Retail and DTC sales are generally taxable once you have nexus.
Does Shopify file my US sales tax returns?
No. Shopify can calculate and collect sales tax at checkout once you configure the states where you are registered, but registering with each state, filing returns, and remitting the tax are your responsibility, or your accountant's or a sales tax service's.
Related Resources
GST, HST, and PST setup for Canadian customers
Duties and trade rules for Canada and US shipping
Selling to new countries from one Shopify store
Document tax-exempt wholesale orders
Selling into the US and unsure where you owe tax?
AtlanticWorks reviews your Shopify US sales by state, your fulfilment footprint, and your tax settings, then shows you where nexus risk sits and what to fix first. The free assessment is the place to start.
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