Frequently Asked Questions

Online sellers must collect sales tax in states where they have "nexus" (a significant connection). This includes:

• Physical presence: Office, warehouse, or employees in a state
• Economic nexus: Exceeding sales/transaction thresholds (typically $100,000 in sales or 200 transactions)

Once you have nexus, you must register for a sales tax permit, collect tax at the appropriate rate, and file returns (usually monthly, quarterly, or annually).

Economic nexus is a tax connection triggered by sales volume or transaction count in a state, regardless of physical presence. After the 2018 South Dakota v. Wayfair Supreme Court decision, all states with sales tax have economic nexus laws.

Common thresholds:

• $100,000 in sales to customers in the state (most common)
• 200 or more transactions (some states)

Thresholds vary by state. Use our Nexus Tracker to monitor your status.

No, you only collect sales tax in states where you have nexus. This could be:

• Your home state (where your business operates)
• States where you have economic nexus (high sales volume)
• States where you have physical presence (warehouse, office, employees)

Many small sellers only have nexus in 1-5 states. Track your sales by state to know when you're approaching nexus thresholds.

Amazon automatically collects and remits sales tax for FBA (Fulfilled by Amazon) sellers in all states where Amazon has marketplace facilitator obligations. This covers most states.

What this means:

• Amazon collects tax from customers
• Amazon files returns and pays tax to states
• You don't need to register or file in these states for FBA sales

Exception: If you have your own warehouse or make non-FBA sales, you may still need to collect tax yourself. See our Marketplace Facilitator Guide.

Registration process varies by state but generally involves:

1. Determine nexus: Confirm you have nexus in the state
2. Visit state website: Go to the state's revenue department website
3. Complete application: Provide business info (EIN, address, estimated sales)
4. Receive permit: Get your sales tax permit/license (usually immediate)
5. Set up filing: Note your filing frequency and deadlines

Most states offer online registration. Some charge a small fee ($0-$50). Processing is usually immediate or within 1-2 weeks.

A marketplace facilitator is a platform that facilitates sales between sellers and buyers. Under marketplace facilitator laws, the platform (not the seller) is responsible for collecting and remitting sales tax.

Common marketplace facilitators:

• Amazon (FBA and most seller-fulfilled)
• eBay (most categories)
• Etsy (in most states)
• Walmart Marketplace

Platforms where YOU collect tax:

• Shopify stores (your responsibility)
• WooCommerce stores (your responsibility)
• Your own website

Failure to collect and remit required sales tax can result in:

• Back taxes: You owe the uncollected tax (comes from your pocket, not customers)
• Penalties: 5-25% of tax owed per month
• Interest: Accrues on unpaid amounts
• Audits: States may audit your records

Many states offer voluntary disclosure programs with reduced penalties if you come forward proactively. It's always better to register late than never.

Filing frequency depends on your sales volume and varies by state:

• Annual: Very low sales (under $1,000/year tax collected)
• Quarterly: Most common for small/medium sellers
• Monthly: High-volume sellers (over $100K/year tax collected)

States assign your frequency when you register. You may start quarterly and move to monthly as sales grow. Use our Filing Calendar to track deadlines.

Shipping taxability varies by state:

• Not taxable: If separately stated and actual shipping cost (most states)
• Taxable: Some states (AR, CT, DC, KY, MI, NJ, NY, NC, OH, PA, TX, WA, WV) may tax shipping
• Handling charges: Usually taxable if combined with shipping

Best practice: Separately state shipping charges on invoices and charge tax according to state rules.

Digital products (e-books, software, online courses, music, videos) have different tax rules than physical goods:

• About 30+ states tax digital products
• Definitions vary (some tax "digital goods," others only specific types)
• SaaS (Software as a Service) has different rules than downloaded software

Use our Taxability Checker to see if your digital products are taxable in each state.

US sales tax only applies to US customers. For international sales:

• No US sales tax: You don't collect US sales tax on international orders
• VAT/GST: You may need to collect VAT (Europe), GST (Canada, Australia), or other foreign taxes depending on your sales volume
• Customs duties: Paid by customer upon import (usually not your responsibility)

Focus on US sales tax compliance first, then research international tax obligations if you have significant foreign sales.

This determines which tax rate to charge:

• Destination-based (most states): Charge tax rate of customer's location
• Origin-based (AZ, CA, IL, MS, MO, NM, OH, PA, TN, TX, UT, VA): Charge tax rate of your business location for in-state sales only

Note: Even origin-based states use destination rates for out-of-state sales. Our Sales Tax Calculator handles this automatically.