How to Prioritize Sales Tax Compliance: A Practical Roadmap for Ecommerce & SaaS Sellers

Sales tax issues can pile up quickly, but knowing what you owe and which states pose the highest risk helps you regain control.

Let’s be honest — sales tax issues have a way of stacking up faster than online orders during a sale. Most merchants know they owe something somewhere, but figuring out where to start is the hard part.

For Shopify and other ecommerce sellers, sales tax compliance isn’t optional but a growing risk that can’t be ignored. Should you tackle the states where you owe the most first, or focus on the ones most likely to enforce? Do older liabilities deserve priority, or the ones tied to your biggest markets?

In this guide, we’ll break down how to prioritize sales tax issues using practical criteria, so you can stop feeling overwhelmed and start addressing your liabilities with confidence.

Understand Your Baseline – What You Owe

The first step in tackling sales tax compliance is understanding your baseline — what you owe, where you owe it, and the risk each state poses. The size of your unpaid sales or use tax should always be your starting point: larger amounts mean greater financial exposure and a higher risk of attracting auditor attention.

Begin by identifying states where you’ve established nexus, either through sales volume, transaction thresholds, or physical presence. From there, estimate how far back those liabilities go — older, unfiled periods tend to carry more risk and can compound quickly.

Don’t forget that states rarely stop at collecting the base tax amount; they also add interest, penalties, and late fees, which can significantly increase what you owe. Many sellers are surprised to learn their “manageable” tax bill can double once these extras are factored in.

By quantifying your total exposure, you’ll have a clearer picture of which states pose the biggest immediate risk. 

Tip: Create a simple spreadsheet listing every state where you may have nexus. List your estimated tax due and the projected interest and penalties. Consider this your roadmap for prioritizing your next steps for compliance.

Assess State Enforcement & Audit Risk

Not all states are equally aggressive. Some audit more often and levy steeper penalties than others, so “where” you owe can matter as much as “how much.”

New York openly emphasizes audits, bills, and collections for businesses and publicly details its audit process, signaling a robust enforcement posture. Texas likewise publishes extensive audit procedures and guidance through the Comptroller, underscoring active enforcement.  

Recent rule shifts can also change your risk overnight. For example, Alaska (via the ARSSTC) repealed its 200-transaction threshold effective January 1, 2025—leaving a sales-only trigger and potentially pulling some smaller sellers out of scope while keeping higher-revenue sellers squarely in it.  

Watch small-seller thresholds you may have crossed: California, Texas, and New York all use higher bars than many states. California and Texas at $500,000 in sales, and New York at $500,000 plus 100 transactions, so exceeding these levels typically means registration and collection obligations.  

Mini-framework (risk score per state, 1–5):

1. Enforcement level: Some states, like New York and Texas, are known for frequent audits and strict collection practices, so they should rank higher on your risk scale.

2. Policy aggressiveness: Watch for states that recently tightened nexus rules or removed transaction thresholds—like Alaska’s 2025 update—as they can quickly increase your exposure

3. History of collections: States with a strong record of public enforcement actions or detailed audit manuals typically pose higher compliance risks.

4. Your exposure: Compare your sales volume and transactions against each state’s thresholds to see where you’ve likely triggered nexus and potential back taxes.

Tip: Before prioritizing, sanity-check each state with public sources—state tax authority sites, audit pages, and reputable threshold trackers (e.g., Sales Tax Institute). This helps you gauge enforcement climate and confirm whether you’ve crossed a threshold today_, not last year._  

Factor in Time-Lapsed Liability & Exposure Period

Time is not on your side when it comes to unpaid sales tax, the longer a liability lingers, the larger it grows. Older balances accumulate interest and penalties, compounding your total exposure and drawing more attention from auditors.

In many states, the statute of limitations—the period during which the state can audit you—only starts once you’ve filed a return. That means if you never filed in a state where you had nexus, your exposure may be unlimited.

To reduce risk, prioritize older periods and unfiled states first, since these often carry the heaviest financial and compliance burdens. Once those are addressed, you can focus on newer, lower-risk obligations.

Tip: Build a simple matrix listing each state and tax year to visualize where liabilities are oldest and most urgent—then tackle the red zones first.

Consider Business Impact & Cash Flow

Even if the amount you owe in a state is relatively small, the business impact can still be significant if that state represents a large share of your revenue. Losing the ability to sell or getting tied up in an audit there could disrupt operations far more than the dollar value suggests.

Audits themselves can be time-consuming, pulling management and finance teams away from core business activities. At the same time, large liabilities can strain your cash flow, especially if several states demand payment at once.

You may need to plan for payment schedules, reserves, or settlement negotiations to avoid operational stress. Balancing financial exposure with business continuity ensures you’re protecting both compliance and stability.

Tip: For each state where you have nexus, map your revenue share against potential liability to see where the financial and operational risks overlap — those should move to the top of your priority list.

Build a Prioritisation Score & Roadmap

Once you’ve assessed how much you owe, where you owe it, and the associated risks, it’s time to turn your findings into a clear action plan. The easiest way to do this is by assigning each state a priority score based on four main factors:

1. Owed tax amount – High, medium, or low.

2. Audit/enforcement risk – High, medium, or low.

3. Age of liability – Older liabilities score higher because they carry more exposure.

4. Business impact – High if the state represents significant revenue or operational importance.

Here’s an example of how a prioritization table might look:

Once you’ve built your table, visualize it as a heat map to quickly identify high-risk states — the darker the shade, the higher the urgency. This approach helps you focus on the areas that pose the greatest compliance and financial threats first.

After identifying your highest-priority states, take immediate action to reduce exposure. That might include registering to collect sales tax, filing missing returns, or working with a tax advisor to resolve outstanding liabilities.

For larger debts, consider negotiating a payment plan with the state to manage cash flow while staying compliant. Tackling high-risk items first not only minimizes penalties but also builds momentum to address lower-priority issues more efficiently.

Tip: Keep your documentation organized, including sales records, nexus evidence, and past filings, so you’re always audit-ready and can respond quickly if a state requests information.

Automate Your Sales Tax Monitoring with Kintsugi

Sales tax compliance isn’t a one-and-done task — rules evolve constantly, from new economic nexus thresholds to shifting marketplace facilitator laws. What’s compliant today might not be tomorrow.

That’s why ongoing monitoring is critical: you need visibility into revenue thresholds, marketplace sales, and state law updates in real time. Manual tracking through spreadsheets can’t keep up with that pace or complexity.

With Kintsugi Sales Tax Automation, businesses can stay ahead effortlessly. The platform continuously monitors your nexus exposure across all states, sends real-time alerts when you approach or exceed thresholds, and consolidates all compliance data into one centralized dashboard. It also integrates seamlessly with your e-commerce and accounting systems, ensuring that every sale, exemption, and remittance stays in sync.

Set up a simple internal process — like a quarterly review of state exposures — and let Kintsugi handle the heavy lifting in between. With automation managing your tax triggers and enforcement insights, you can shift from reactive fixes to proactive compliance — saving time, money, and peace of mind.

Ready to simplify your sales tax compliance? Let Kintsugi track your nexus thresholds, automate filings, and alert you before issues become liabilities.

You can try our free tax exposure (nexus) assessment or book a demo to see how effortless compliance can be.