Court Ruling Signals Bigger Compliance Risks for Online Sellers

In April 2025, the U.S. Court of Appeals for the Ninth Circuit ruled in Briskin v. Shopify, Inc. that Shopify can be sued in California based on how it interacts with California consumers online, even though the company operates nationally and is based outside of California. The decision marks a significant shift in how jurisdictional standards apply to online commerce.

The case involved a California shopper who alleged that Shopify collected and used personal data, including geolocation and device information, during the checkout process without proper disclosure. Shopify argued that because it operates a nationwide platform and does not specifically target California, it should not be subject to lawsuits in California. The Ninth Circuit rejected Shopify’s argument stating that operating an interactive e-commerce platform that knowingly engages with in-state consumers and benefits from those interactions can establish sufficient minimum contacts for specific personal jurisdiction to defend a lawsuit in that state, regardless of whether it actively markets there or not.

The ruling expands litigation exposure for digital platforms. Although the ruling focuses on privacy, not taxes, it reinforces a concept sales tax authorities have relied on for years: Doing business with customers in a state can create real obligations, even without a physical presence. Because most e-commerce platforms operate across state lines, the decision increases the likelihood that companies could face lawsuits in multiple jurisdictions based on consumer location alone. Businesses that sell online may see increased changes to platform terms of service, enhanced data-collection disclosures at checkout and greater scrutiny of how consumer location and transaction data are managed.

For businesses selling online, especially across state lines, this case reinforces some practical points:

• Customer location matters. States look closely at where your consumers are, not just where your business is based.
• Platforms do not eliminate responsibility. Even if you sell through an e-commerce platform, you still need to understand how transactions are handled and how sales tax is applied.
• Documentation and setup are critical. Accurate addresses, correct tax calculation settings, and clear records can make a significant difference during audits.
• Compliance is becoming more connected. Privacy, payments, and sales tax compliance increasingly overlap in how states evaluate online.

Staying informed, reviewing your e-commerce setup, and checking your multistate sales activity can help avoid surprises down the road. (Briskin v. Shopify, Inc., U.S. Court of Appeals for the Ninth Circuit, April 21, 2025)