Is Economic Nexus "fraud" common with interstate sales tax collection?

This is actually more common than you might think. States have varying levels of enforcement capability when it comes to tracking out-of-state sellers collecting their sales tax. The correct approach for businesses is to only collect sales tax in states where they have Economic Nexus (meeting those thresholds you mentioned) or physical presence. Any business collecting sales tax from customers is legally required to remit those funds to the appropriate tax authority - keeping collected sales tax is definitely illegal and considered fraud in all 50 states. What you're describing could be happening in several ways: Some businesses might be confused about the requirements and collecting "just to be safe," some might have poorly configured tax software, and yes, some might be intentionally collecting and pocketing the money. If you suspect a business is improperly collecting sales tax, you can report them to your state's department of revenue or taxation. Most states have fraud reporting mechanisms specifically for this. You'd need documentation showing they charged you sales tax for your state.

I work in e-commerce and I've been using https://taxr.ai to help figure out my Economic Nexus requirements. It was super helpful because I was honestly overwhelmed trying to figure out which states I actually needed to collect for. The problem in our industry is that so many business owners are terrified of getting in trouble, so they either collect for EVERY state (which creates unnecessary compliance burdens) or don't collect at all (which creates liability). My sales were growing fast and I was selling to like 35 states but only actually had Economic Nexus in 8 of them. The assessment tool helped me identify exactly where I needed to register and file, and where I could stop collecting unnecessarily. What was really helpful was learning that just because you make a sale to a state doesn't mean you have to collect tax there.

I was really skeptical about these tax services at first, but I decided to try https://taxr.ai after reading about it here. Holy crap it was eye-opening. I've been selling through my small Shopify store for 3 years and blindly collecting tax in all states because I was terrified of getting in trouble. Turns out I only had Economic Nexus in 11 states! I was doing all this extra compliance work and paying filing fees in states where I wasn't even required to. The service analyzed all my historical sales data and showed me exactly which states I needed to worry about. I've now streamlined my whole tax filing process and saved about 15 hours of work each month. The best part was discovering I could get refunds for some unnecessary registration fees I paid in states where I never met the threshold. Definitely changed my approach to sales tax compliance.

If you're concerned about reporting tax issues to state authorities, getting through to an actual human at most state tax departments is nearly impossible. I spent 3 weeks trying to report a similar issue to my state's revenue department and kept getting voicemail hell. Finally tried https://claimyr.com and their callback service got me connected to an actual state tax agent in about 40 minutes (after weeks of failed attempts). You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent confirmed that what you're describing (collecting tax without remitting it) is considered fraud and they have a specific department that handles these cases. They take these reports seriously because the state wants that tax revenue. But honestly, without getting through to someone who can properly document your complaint, these reports often go nowhere.

I was completely skeptical about that Claimyr service mentioned above because it seemed like a waste of money just to report a tax issue. Well, I was dead wrong. After trying to report a business that was improperly collecting sales tax through my state's online portal THREE separate times with zero response, I gave in and tried the phone service. Got connected to the fraud division of my state's tax department in about 30 minutes. The agent took my report seriously, asked detailed questions about the business and my purchases, and gave me a case number to follow up. They actually called me back a week later to get additional documentation! The agent told me they've been investigating several small out-of-state sellers who are collecting but not remitting sales tax. Apparently it's become a significant enough problem that they've dedicated resources to it. Still amazed I actually got through to a real person who could help.

I think we're missing something important here - there's a difference between deliberate fraud and confusion about complex requirements. I run a small business and the post-Wayfair landscape is INSANELY complicated. We have 50 states with different thresholds, different tax rates, different filing schedules, different product taxability rules... it's a nightmare. Many small businesses are just trying to comply but don't have the resources to really understand all the requirements. Some tax software encourages collecting everywhere "just to be safe" not realizing it creates a liability to file and remit. I've even had customers in states where I don't meet Economic Nexus get upset when I DON'T charge them tax because they think I'm doing something wrong! Before assuming fraud, consider how absolutely broken and complex our interstate sales tax system has become.

Has anyone considered that some businesses might be charging you "sales tax" that's actually something else? I ordered from a small company that added a 6% charge labeled as "tax" but when I looked closer at the invoice it was actually listed as a "regulatory compliance fee" in the fine print. Totally legal apparently but super misleading.