Do I need an LLC to sell on Shopify or Amazon?

Not as a legal precondition in most cases — you can start as a sole proprietor. But an entity gives you liability separation, is increasingly expected during payment and marketplace verification, and for sellers outside the US a US entity is often what makes Shopify Payments or Amazon's US marketplace accessible at all.

Who collects sales tax when I sell on Amazon?

Marketplace facilitator laws make the marketplace responsible for collecting and remitting sales tax on sales made through it, in the states where those laws apply. That does not cover sales through your own website, where the obligation remains yours once you have nexus in a state.

What creates sales tax nexus?

Physical presence — inventory, staff, an office — or economic nexus, meaning exceeding a state's sales or transaction threshold. Storing inventory in a fulfilment warehouse in a state generally creates physical nexus there, which is why FBA sellers can acquire obligations in states they have never visited.

Can I sell on Amazon US from outside the United States?

Yes. Amazon supports sellers in many countries, and the practical requirements are a bank account that can receive payouts in a supported currency, tax information via Amazon's tax interview, and identity documents. A US entity and US bank account simplifies payouts but is not universally required.

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Operate · 5 min read

E-commerce operations: entity, sales tax and marketplace payouts

Selling online in the US means three systems you didn't sign up for: marketplace rules, sales tax nexus, and inventory accounting. Here's how they fit together.

The short answer

You do not legally need an LLC to sell online, but marketplaces and payment processors increasingly expect a registered entity, and it separates business liability from personal assets. Sales tax obligations are triggered by nexus, and marketplace facilitator laws shift collection to Amazon or Etsy for sales made through them — but not for your own storefront.

E-commerce founders tend to arrive at company formation from the opposite direction to everyone else. They are already selling. The entity question shows up because a platform asked for tax details, or a payout was held, or somebody mentioned sales tax and it sounded expensive.

Do you need an entity?

Legally, in most cases, no — you can sell as a sole proprietor. Practically, the answer changes as you grow.

Stage	Entity needed?	Why
Testing, under ~$1k/month	No	Overhead outweighs benefit
Steady revenue	Worth it	Liability separation; cleaner books and deductions
Holding inventory	Yes	Product liability is real and personal without one
Selling from outside the US	Usually yes	Often what makes US payment rails accessible
Multiple owners	Yes	Ownership needs to be documented somewhere

The international case is the strongest. For many sellers the US entity is not about liability at all — it is what makes Shopify Payments, US marketplace accounts and USD payouts possible in the first place.

Sales tax, which is not income tax

Sales tax is administered by states, has nothing to do with the IRS, and is triggered by nexus — a connection with a state.

Physical nexus — inventory, staff, an office, or a fulfilment warehouse holding your goods.
Economic nexus — exceeding a state's sales or transaction threshold. Thresholds vary by state and have been revised repeatedly since 2018.

Marketplace facilitator laws help — partly

States now generally require the marketplace to collect and remit sales tax on sales made through it. Amazon and Etsy handle it for their own channels. The gap is your own storefront: a Shopify site you own is not a marketplace, so once you have nexus in a state, collecting there is your responsibility.

The common structure — an Amazon channel plus a direct site — therefore has two different treatments running at once. Thresholds and rules change often enough that any list you find should be verified against the state before you rely on it.

How the platforms actually pay you

Platform	Payout timing	Watch for
Shopify Payments	Rolling, on a set schedule	Country eligibility — not available everywhere
Amazon	Roughly every two weeks	Reserves on new accounts; fees deducted before payout
Etsy	Scheduled per your settings	Fees and ad costs netted off
Own Stripe	Rolling, typically 2 days once established	Longer holds and reserves at the start

Platform terms change and vary by country. Check the platform's current documentation.

Payment processing

Processor and marketplace setup for your entity and country, with payout routing and reserve terms understood before you commit inventory.

See what's included

Inventory accounting, where margins go missing

The most common reason an e-commerce founder's books show a profit that the bank account does not is landed cost. The unit price is not the cost of the unit.

Product cost from the supplier.
Freight to the destination.
Duties and customs charges.
Inbound fulfilment fees to get stock into the warehouse.
Storage, which compounds on slow-moving lines.

All of it belongs in cost of goods sold. Record only the supplier invoice and every margin you calculate will be optimistic — often by enough to make a losing product look like a winner.

Inventory is also an asset, not an expense, until it sells. Buying $40,000 of stock is not a $40,000 deduction in the month you buy it. Getting this wrong distorts both your management accounts and your tax position.

Importing into the US

Customs duties depend on the product's classification code and country of origin.
A customs bond is generally required for commercial imports above a value threshold.
Low-value shipment rules have been subject to active policy change — verify the current position with CBP rather than relying on older guidance.
A customs broker is worth the fee for anything beyond an occasional shipment.

The 1099-K surprise

Platforms report gross payment volume to the IRS. Your 1099-K will therefore be larger than your revenue, because it is before fees, refunds and chargebacks. This is normal and expected — but your books need to reconcile to it, which means recording gross revenue and each deduction separately rather than booking net deposits.

Where to go next

Bookkeeping covers the inventory and COGS mechanics. Taxes covers nexus in more depth. If you are selling into the US from abroad, start with international founders.

Frequently asked questions

Do I need an LLC to sell on Shopify or Amazon?: Not as a legal precondition in most cases — you can start as a sole proprietor. But an entity gives you liability separation, is increasingly expected during payment and marketplace verification, and for sellers outside the US a US entity is often what makes Shopify Payments or Amazon's US marketplace accessible at all.
Who collects sales tax when I sell on Amazon?: Marketplace facilitator laws make the marketplace responsible for collecting and remitting sales tax on sales made through it, in the states where those laws apply. That does not cover sales through your own website, where the obligation remains yours once you have nexus in a state.
What creates sales tax nexus?: Physical presence — inventory, staff, an office — or economic nexus, meaning exceeding a state's sales or transaction threshold. Storing inventory in a fulfilment warehouse in a state generally creates physical nexus there, which is why FBA sellers can acquire obligations in states they have never visited.
Can I sell on Amazon US from outside the United States?: Yes. Amazon supports sellers in many countries, and the practical requirements are a bank account that can receive payouts in a supported currency, tax information via Amazon's tax interview, and identity documents. A US entity and US bank account simplifies payouts but is not universally required.

Topics in this guide

Sources

Last reviewed August 23, 2026. Fees, deadlines and government processing times change — verify against the primary source before acting.

Founders 8 does not provide tax advice. Tax residency depends on facts and rules specific to each jurisdiction — review your position with a qualified adviser.