There's a workaround circulating in ecommerce circles that sounds like a reasonable escape hatch…on the surface: 

A founder realizes they've racked up years of unpaid sales tax across multiple states, including back taxes, interest, and penalties that have compounded into a huge number that’s hard to face. 

So instead of facing it, they dissolve the old entity, form a new LLC, get a fresh EIN, transfer the inventory and customer relationships, and keep selling. Clean slate. Problem solved.

Except it isn't solved. And in most cases, it's made significantly worse.

Today, we’ll share:
🔸 How sales tax back taxes accumulate in ecommerce.
🔸Why the "new EIN" move doesn't work the way most founders hope it will.
🔸 What to do if you’ve already fallen behind on sales tax and owe penalties and back taxes. 

How Sales Tax Back Taxes Accumulate in Ecommerce

Most ecommerce founders don't set out to avoid sales tax. The liability tends to build gradually, and the early stages are easy to miss.

Before 2018, the rules were simpler. Sales tax obligations were largely tied to physical presence: a warehouse, an office, employees in a state. If you were shipping from a garage in Ohio to customers in California, you generally didn't owe California sales tax.

South Dakota v. Wayfair changed that. The Supreme Court ruled that states could require out-of-state sellers to collect and remit sales tax based purely on economic activity, with no physical presence required. Today, most states have economic nexus thresholds, typically $100,000 in sales or 200 transactions per year, and crossing those thresholds creates a real, enforceable obligation.

A brand that grows from $500K to $5M in revenue over a few years may have quietly triggered nexus in a dozen or more states along the way. Sales tax wasn't collected. Returns weren't filed. And the clock was running the entire time.

Back taxes accrue from the date obligations began, not the date someone discovered them. Add compounding interest and civil penalties on top, and what started as a manageable oversight can balloon into something that genuinely threatens the business.

That's when some founders start looking for shortcuts.

The "New EIN" Move…and Why It Doesn't Work

The logic seems sound: if the old entity carries the liability, dissolve it and start fresh. Get a new EIN, open a new business under a new name, and the debt stays behind with the old shell.

What some founders don’t consider is that states have seen this all before, and they've written their laws accordingly.

The legal concept at work here is successor liability, the principle that an entity continuing the same business operations can inherit the tax obligations of the predecessor, regardless of how the transition was structured. Several states have codified this directly into their tax statutes, specifically to close the "fresh entity" loophole. For example:

▶️ Texas is explicit. Under Texas Administrative Code § 3.7, a purchaser of any business or stock of goods is liable for any amount owed the state by the seller, unless a Certificate of No Tax Due is obtained from the Comptroller. If that certificate isn't in hand, the successor is personally liable for the predecessor's unpaid taxes up to the value of the purchase price.

▶️ Louisiana goes further. Under La. Rev. Stat. Ann. § 47:308 and La. Admin. Code § 61:I.4357, if a dealer opens a similar business under the same ownership, that new business is liable for any tax, interest, or penalty owed by the original. Louisiana also explicitly states it will not honor agreements between buyer and seller that attempt to shift this liability elsewhere.

▶️ California's Sales & Use Tax Regulation 1702 states that a successor's liability extends to all taxes, penalties, and interest incurred by the predecessor entity. Critically, the regulation specifies that a successor can only be relieved of liability where there is no relationship between the successor and predecessor. A founder who transfers their own business to a new entity they control is unlikely to qualify.

▶️ Washington holds successors liable when more than 50% of a predecessor's assets are acquired, unless proper notice is filed with the state Department of Revenue and no assessment is issued within six months.

The pattern across these states is consistent: transferring a business to a new entity under the same or related ownership doesn't extinguish the old tax debt. It often just extends liability to the new entity, and sometimes to the founder personally.

Skipping Registration Doesn’t Pay Off

Some founders take a different approach: skip the restructuring and simply keep not registering, hoping no one notices.

Post-Wayfair, that's a riskier bet than it used to be. States have invested significantly in identifying and pursuing remote sellers. Major platforms such as Shopify, Amazon, and WooCommerce report sales data, and states cross-reference it. Marketplace facilitator laws mean that even where Amazon collects tax on your behalf, states are still tracking your volume and watching for nexus thresholds.

Penalties compound fast: back taxes owed from the date obligations began, interest accruing from those same dates, and civil penalties layered on top. In states that treat unlawful tax collection as fraud, there's potential criminal exposure as well. Beyond the direct financial cost, there's frozen payment processing, blocked marketplace accounts, and audit findings that surface at the worst possible moment, like during fundraising, an acquisition, or due diligence.

What Founders Should Do Instead

The compliance burden is heavy, especially if you’re doing it manually, and the anxiety that leads founders toward risky workarounds is understandable. But there's a legitimate path forward that doesn't involve entity gymnastics or hoping states stay busy elsewhere.

▶️ Step 1: Get a nexus assessment. Before anything else, understand exactly where you have economic nexus today—which states, and for how long. This is the foundation everything else builds on, and it often reveals that exposure is more contained than it feels.

The Kintsugi nexus assessment is free!

▶️ Step 2: Consider a Voluntary Disclosure Agreement (VDA). Most states offer VDAs for businesses that come forward proactively. VDAs typically cap lookback periods and waive penalties for good-faith disclosure. A VDA is the legitimate version of a fresh start: it limits your historical exposure without the legal risk of restructuring to evade debt.

▶️ Step 3: Register, then automate. Once you know where you owe, register in each applicable state and implement a system that handles calculation, collection, filing, and remittance going forward. The goal is to make future compliance automatic, so this problem can't quietly rebuild itself.

▶️ Step 4: Stop trying to outrun it. The compliance burden only grows as your business scales. Every new state, every new sales channel, every new product category adds complexity. Getting right with sales tax now protects your valuation, your banking relationships, and your ability to raise or exit cleanly.

This Is the Problem Kintsugi Was Built to Solve

The circumstances that push founders toward drastic moves are real. But the answer isn't avoidance. It's remediation and a system that prevents the problem from recurring.

Kintsugi handles nexus monitoring, registration, filing, and remittance automatically, so sales tax compliance runs in the background as you grow. And when there's historical exposure to address, our team can help you understand your options (including VDAs!) so you can move forward with a clean record and without the risk that comes with trying to outmaneuver state tax authorities.

You don't need a workaround. You need a system.