3PL and Print-On-Demand: When Do You Need to Worry About Sales Tax?

E-commerce has made it easier than ever to sell and ship products nationwide, but it’s also made sales tax compliance harder than ever. One challenge many online sellers overlook is when and how they trigger sales tax nexus in a given state.

Before internet sales boomed, determining nexus was straightforward: if you had a physical store, you collected and owed sales tax where that store was located. Today, even if you operate entirely online, storing inventory or using third-party fulfillment services can create nexus. And if you have nexus, you’re required to register, collect, and remit sales tax in that state.

Add print-on-demand (POD) and dropshipping suppliers, and the water gets murkier.

In this article, we’ll clarify how physical and economic nexus work, explain how inventory and fulfillment relationships can create new tax obligations, and help you prepare your business for compliance.

Key Takeaways

• Holding inventory in a state (via your own warehouse or a 3PL) creates physical nexus in that state.
• Economic nexus (based on total sales or transaction volume) applies to online sellers without a physical presence.
• Most print-on-demand platforms collect and remit sales tax for you, unless you already have nexus.
• Dropship sellers must evaluate both their own and their supplier’s nexus status to ensure proper resale documentation and tax handling.
• Map where your inventory or fulfillment partners operate, track sales, and register where required to avoid penalties and back taxes.
• A tax-compliance partner like SalesTaxSolutions.US can help you identify your nexus footprint, handle registration, and manage filings.

What is Physical Nexus and How Inventory or Fulfillment Centers Trigger It

Traditional physical nexus

Historically, nexus meant a business had a physical presence in a state—like a store, office, employees or warehouse. After the South Dakota v. Wayfair decision in 2018, states began enforcing economic nexus as well. However, physical nexus rules still apply, and many states continue to treat inventory storage as a taxable presence.

Owning or leasing your own warehouse

Suppose you open your own mini-warehouse or storage unit in State Y and send your inventory there for faster fulfillment of customers in the region. Even though you don’t have a storefront or employees, the inventory presence will likely trigger physical nexus in State Y.

Using a third-party warehouse or fulfillment center (3PL)

Most states consider inventory stored within their state—even for fulfillment—a nexus trigger. For example:

• California considers a person operating a fulfillment center as performing a service on behalf of the seller and not selling goods themselves. Consequently, sellers using the fulfillment center to store inventory are required to register with the California Department of Tax and Fee Administration.

Pro Tip: Many 3PLs redistribute products across multiple warehouses in different states without notice. Always review your fulfillment reports to track where your goods are store.

Why this matters for your fulfillment strategy

If you use fulfillment centers (or send inventory to multiple states), you could owe sales tax in every state where your products are stored. That means you must:

• Register for a sales tax permit in each nexus state.
• Collect and remit sales tax on orders shipped to customers in those states.
• File periodic returns and maintain sales records.

Key questions to ask

• Where is your inventory physically stored right now?
• How many warehouse locations does your 3PL use?
• Have you registered in each state where your inventory is held?

Ready to map your inventory footprint and check your nexus exposure? Sign up with SalesTaxSolutions.US today to evaluate your fulfillment states and protect your e-commerce operations.

Print-On-Demand (POD): Does the Supplier’s Presence Give You Nexus?

How print-on-demand works

In a print-on-demand (POD) model, you design and list your own branded merchandise online. When a customer places an order, the POD provider prints and ships it directly. It’s a low-risk model for sellers; they don’t need to create or hold inventory themselves. But it’s not automatically free from nexus or tax obligations.

When POD may trigger nexus

If your POD provider does not have nexus in a state, you might reach economic nexus thresholds by yourself (usually if you hit over $100,000 in sales in the previous 12 months). Track your state-by-state sales at least quarterly to stay compliant.

If both you and your POD provider have nexus in the same state, you must provide a valid resale certificate to the provider to avoid double taxation. Without it, your provider may charge extra sales tax on top of the tax you collect from customers.

When POD usually doesn’t trigger nexus

Most major POD companies—like Printify and Printful—already have nexus in most states due to economic nexus laws. In those cases, they collect and remit sales tax for you automatically based on the customer’s shipping address.

Other POD considerations

• Marketplace facilitators like Etsy and Amazon handle sales tax collection for platform-based sales—but you’re still responsible for nexus compliance on your own website or external sales channels.
• If you store pre-printed inventory or bulk stock at a POD facility, you may create physical nexus in that state.

Key questions to ask

• Research your POD supplier: where (if anywhere) do they have nexus?
• Monitor your POD sales volume: even without physical nexus, have you triggered economic nexus in one or multiple states?

Dropshipping Considerations (2025)

What is dropshipping?

Like POD, dropshipping involves a third-party fulfilling orders for you. However, instead of custom designs, you resell existing products from a manufacturer or wholesaler who ships directly to your customer.

Consider the supplier’s nexus

In a dropshipping transaction, there are two separate sales:

1. Supplier to Retailer (you)
2. Retailer (you) to Customer

To accurately collect and remit sales tax, you must evaluate who has nexus. Use the table below for an easy breakdown of dropship nexus.

Key questions to ask

• Where does your supplier store or ship inventory?
• Do they require proper resale certificates?
• Have your sales volumes crossed a state’s economic nexus threshold?
• Have you registered to collect and remit sales tax in states where you have nexus?

Feeling overwhelmed managing multiple state filings? Sign up for the SalesTaxSolutions.US “Tier 2” or “Tier 3” plan and let our experts handle registrations, filings, and compliance for you.

Final Thoughts

Whether you use fulfillment centers, print-on-demand, or dropshipping, your operations likely span multiple states—and that means multiple nexus risks. Staying proactive about tracking inventory, understanding supplier nexus, and registering early is the best way to avoid costly surprises.