Episode Description
Since the 2018 Wayfair Supreme Court ruling, online sellers can owe sales tax in any US state where they cross a revenue threshold — even without a physical presence. Most eCommerce founders either don't know their exposure exists or assume they're too small to be a target. In this episode, Nate sits down with Lahari Neelapareddy, CPA and founder of TaxHero, to break down exactly what sales tax enforcement looks like right now and what founders at every revenue stage need to understand before it costs them.
They cover economic nexus in plain terms, what a real audit looks like from the moment the notice arrives, and why the back taxes that come due are a pure cash hit — because you never collected the money from customers in the first place. Lahari explains why states are already identifying non-compliant sellers before they knock, what the window to get ahead of it looks like, and why Voluntary Disclosure Agreements exist and when they stop being an option.
They also get into what it cost early TaxHero clients who tried to use Avalara and got it wrong, the pricing reality of managed compliance versus the risk of DIY, and why clicking "start collecting" in Shopify is not the same as being registered in a state.
Key Takeaways
- The Wayfair ruling changed everything for online sellers. Economic nexus means you owe sales tax in any state where you cross $100K in annual revenue — no physical presence required. Most eCommerce founders still don't have a clear picture of their exposure.
- A $2M brand can have obligations in 10 to 15 states simultaneously. Size is not the protection founders assume it is.
- States already have your data. 1099-K filings, marketplace reports, and payment processor data all flow to state revenue departments. You may already be flagged before you know you have a problem.
- Back taxes come out of your business bank account — not from customers. You never collected that money, which means every dollar of back taxes owed is a direct cash hit to the business.
- An audit is not just a financial event — it's an operational one. Expect 40 to 80+ hours of internal team time to respond to records requests, plus penalties on top of the underlying liability. Washington state adds 39% on top of what you owe.
- Voluntary Disclosure Agreements are the best option for founders who get ahead of this. Once a state identifies you as non-compliant, the window to negotiate narrows significantly.
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