Amazon FBA Sales Tax: Physical Nexus Trap Explained 2026

Economic nexus thresholds exist to protect small sellers from compliance obligations in states where they have minimal economic activity. Physical nexus does not work that way. The moment Amazon places your inventory in a fulfilment centre in Pennsylvania, you have nexus in Pennsylvania — from dollar one, on every Pennsylvania sale, regardless of revenue volume.

This is the Amazon FBA physical nexus trap. It catches a significant number of sellers who believe they are below the threshold and therefore safe.

Physical Nexus — The Basics

Physical nexus is the older and stricter form of sales tax nexus. It predates the Supreme Court’s 2018 South Dakota v. Wayfair decision that created economic nexus. Any meaningful physical presence in a state creates an obligation to collect and remit that state’s sales tax on all sales to that state’s customers:

An office or place of business
Employees or contractors working in the state
A sales representative who visits customers in the state
Inventory stored in the state — including inventory held by a third-party fulfilment provider

The last item is the critical one for FBA sellers.

Why FBA Inventory Triggers Nexus

When you ship products to Amazon FBA, you are transferring physical possession of your goods to Amazon. Amazon then distributes that inventory across its fulfilment network to optimise delivery speed. You do not control this distribution. Amazon moves your products to whichever warehouses its logistics algorithm deems optimal.

Those warehouses are in states. The moment your goods sit in an Amazon fulfilment centre in a state, courts and tax authorities treat that as your inventory, stored on your behalf, in that state. Physical nexus is established.

The key legal principle: a third-party warehouse storing your goods on your behalf creates nexus for you, not just for the warehouse operator. Amazon FBA is no different from renting space in a commercial warehouse — you have inventory in the state, therefore nexus.

Physical nexus bypasses economic thresholds entirely. The $100,000 threshold (or $500,000 for California, Texas, and New York) is irrelevant. Sell $1 to a California customer while you have stock in an Amazon California fulfilment centre and you owe California sales tax on that dollar.

States Where Amazon Operates Fulfilment Centres

As of 2026, Amazon operates fulfilment centres in the following states (non-exhaustive — Amazon continues to expand):

Arizona, California, Colorado, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Kansas, Kentucky, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nevada, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, Tennessee, Texas, Utah, Virginia, Washington, Wisconsin.

You will almost certainly have physical nexus in many of these states if you use FBA, even if you have never sold a single unit to a customer in that state.

Note that Oregon and Delaware have no statewide sales tax — physical nexus there creates no sales tax obligation (Oregon has no sales tax at all; Delaware has no sales tax at all). But all the other states on the list do.

How to Identify Where Amazon Has Put Your Inventory

Amazon provides inventory data through Seller Central that shows which states your stock is sitting in:

Inventory Event Detail Report

Go to Seller Central → Reports → Fulfillment → Inventory Event Detail
Set the date range to the last 12 months
Export the CSV
Filter for fulfillment-center-id values and cross-reference with Amazon’s fulfilment centre state list

Inventory Ledger Report

Go to Seller Central → Reports → Fulfillment → Inventory Ledger
Select granularity: Monthly
The report shows which fulfilment centres received, held, and shipped your inventory

These reports tell you which Amazon facilities have handled your products. Cross-reference the facility codes with the publicly available list of Amazon fulfilment centre locations to identify the states.

This process is manual and tedious, but it is the authoritative source for your physical nexus states.

Third-Party Tools

Several tools automate this process:

TaxJar’s nexus tracking can integrate with your Amazon Seller Central account and identify nexus states based on actual inventory data.
Avalara’s FBA nexus report provides a state-by-state breakdown.
A2X (accounting software for Amazon sellers) can also help surface fulfilment state data.

The Liability for Past Sales

If Amazon has been storing inventory in states where you have not been collecting sales tax, you have a back-period liability. Every sale to a customer in that state during the period your inventory was there — at dollar one — is a taxable sale on which you owed tax.

The practical options:

Voluntary Disclosure Agreements (VDAs)

Most states offer a VDA programme. You proactively approach the state, disclose the uncollected tax, and negotiate a settlement. In return, the state typically:

Limits back-periods to 3–4 years (rather than the full open statute)
Waives or significantly reduces penalties
May reduce interest accrual

VDAs must be initiated before the state contacts you. Once a state audit notice arrives, VDA access is typically closed.

Doing Nothing

Not recommended. State tax authorities are increasingly using Amazon Seller Central data (obtained through audits of Amazon itself) to identify sellers who have nexus but are not registered. If caught, you face the full back-period, full penalties, and full interest — often significantly more than a VDA would have cost.

FBA-Specific Compliance Strategy

Option 1: Register in All FBA States

Register with the tax authority in every state where Amazon sends your inventory, configure collection in each, and file returns on each state’s schedule. This is the most conservative approach. It requires ongoing monitoring as Amazon opens new facilities.

Option 2: Register Only in High-Revenue FBA States

Some sellers choose to register only in states where their FBA-driven sales cross a material threshold (e.g., states generating more than $10,000 in annual sales). This is a risk-based decision, not a compliant one. Physical nexus does not have a minimum — you either have it or you don’t.

Option 3: Use Amazon’s FBA Sales Tax Collection

Amazon acts as a marketplace facilitator in all US states with marketplace facilitator laws — which is all 45 sales-tax states plus DC. This means Amazon already collects and remits sales tax on FBA sales made through Amazon.com on your behalf. You do not collect or remit for those transactions.

This is the critical distinction many sellers miss: if you only sell through Amazon Marketplace, Amazon handles the tax collection. The physical nexus problem becomes significant when you also sell through other channels — your own Shopify store, Etsy, your website — where you are the seller of record and Amazon’s marketplace facilitator role does not apply.

If you sell $200,000 through Amazon and $80,000 through your Shopify store, Amazon collects tax on the Amazon sales, but you must collect and remit on the Shopify sales. And for the Shopify sales, your nexus is determined by your inventory location — which includes Amazon’s warehouses, creating nexus you must honour even in states where your Shopify revenue alone is minimal.

Third-Party Logistics (3PLs) — Same Rules Apply

If you use any US-based third-party logistics provider — ShipBob, ShipMonk, Red Stag, Whiplash, or others — the same physical nexus rules apply. Your goods in their warehouses create nexus for you in their states, from dollar one.

Unlike FBA, with a 3PL you typically have more control over which warehouses hold your stock. You can negotiate to limit inventory to states where you are already registered, or deliberately choose a 3PL with facilities only in states where you have established compliance.

This gives you a compliance advantage over FBA: you can control your physical nexus footprint.

Common Mistakes

Believing the $100,000 threshold protects you. Physical nexus has no threshold. FBA inventory = nexus from dollar one.
Assuming Amazon’s marketplace facilitator role covers your Shopify store. It does not. Amazon collects for Amazon sales; your own store is your own responsibility.
Not pulling inventory location reports before registering. Sellers sometimes register in states based on guesswork rather than actual inventory data, missing states where they truly have nexus.
Ignoring VDA options after discovering back-liability. VDAs exist precisely for this situation; using them is almost always better than waiting.
Treating all 3PLs as equivalent to Amazon FBA. With a 3PL you have control over warehouse location; with FBA you do not. The strategies are different.