When you sell to a customer in another state, you must charge that state’s sales tax if your business has nexus there, meaning either a physical presence or enough sales volume to cross the state’s economic threshold. Charging sales tax when selling out of state comes down to answering three questions in order: do I have nexus in the buyer’s state, is a marketplace already handling collection for me, and if not, how do I register, calculate the right rate, and file? Forty-five states and the District of Columbia impose a sales tax, and each writes its own rules.1Tax Foundation. State and Local Sales Tax Rates, 2026 Alaska, Delaware, Montana, New Hampshire, and Oregon are the only states with no statewide sales tax, so shipments there generally raise no state-level collection question at all.
What Triggers a Collection Obligation
A state can require you to collect its sales tax only if you have nexus there. Nexus comes in two forms.
Physical nexus is the older standard. You have it when something tangible ties your business to the state: a storefront, a warehouse, an employee working there, or inventory held in a third-party fulfillment center. Sellers who use services like Fulfillment by Amazon often discover they have physical nexus in states they never intended to enter, simply because the platform distributed their inventory across its warehouse network. Temporary activities can count too, so a trade show appearance, an on-site repair visit, or a pop-up shop may create nexus depending on the state and how long the activity lasts.
Economic nexus is what changed the game for online sellers. In 2018, the U.S. Supreme Court ruled in South Dakota v. Wayfair that states could require remote sellers to collect sales tax based solely on the volume of sales shipped into the state, without any physical presence.2Cornell Law Institute. Wayfair, Inc., et al. Certiorari to the Supreme Court of South Dakota Every state with a sales tax has since adopted some form of economic nexus law.
Economic Nexus Thresholds and How They Vary
The most widely adopted threshold mirrors South Dakota’s original law: $100,000 in gross sales or 200 separate transactions shipped into the state during the current or preceding calendar year.3Streamlined Sales Tax. Remote Seller State Guidance Cross either number and the obligation kicks in. The uniformity ends there.
A growing number of states have dropped the 200-transaction test and now use a dollar threshold only. Alaska and Utah eliminated the transaction count in 2025, and Illinois followed on January 1, 2026. This matters most for high-volume sellers of low-cost items. A seller shipping $5 stickers could easily hit 200 orders without generating meaningful revenue, yet still be obligated to register.
What counts as “sales” also varies. A majority of states count all gross sales shipped into the state, including exempt sales and sales for resale. A handful, including Arkansas, Florida, Missouri, and North Dakota, count only taxable sales. If you sell $80,000 in taxable goods and $30,000 in exempt goods into a gross-sales state, you have crossed the $100,000 line; in a taxable-sales state, you haven’t.
The measurement window varies too. Most states look at either the current calendar year or the immediately preceding twelve months. Once you cross the threshold in either window, the obligation to register and collect often begins by the first day of the following month.3Streamlined Sales Tax. Remote Seller State Guidance Monitoring has to be ongoing, not annual.
When the Marketplace Collects for You
If you sell through Amazon, Etsy, eBay, Walmart Marketplace, or a similar platform, the marketplace itself is almost certainly collecting and remitting sales tax on your behalf. Every state with a sales tax has enacted a marketplace facilitator law requiring the platform to handle collection when it processes the payment or facilitates the sale. The platform calculates the rate, charges the buyer, and remits the tax. For those transactions, you generally do nothing.
This is the single biggest relief valve for small sellers. If every one of your sales into a given state flows through a marketplace facilitator, you may not need a sales tax permit there at all. Two caveats matter. Some states still require you to register and file returns even when the marketplace collected every dollar of tax; New York is a well-known example. And if you also sell through your own website, direct invoices, or in person, those sales are entirely your responsibility. The facilitator law only covers what runs through the platform.
Registering Before You Collect
Once you determine you have nexus in a state, you must register for a sales tax permit before collecting any tax there. Collecting without a valid permit is illegal in every state, even if you fully intend to remit the money. You need a separate permit from each state where you have nexus and plan to make taxable sales.
Registration is repetitive but straightforward. Each state’s department of revenue asks for your business’s legal name, federal employer identification number or Social Security number, physical address, the date nexus was established, and basic information on expected sales volume. Most states handle it online and issue the permit within a few days. Fees range from nothing to a modest amount, and most states charge nothing.
If you need to register in several states at once, the Streamlined Sales Tax Registration System lets you file a single application covering all 23 full member states of the Streamlined Sales and Use Tax Agreement.4Streamlined Sales Tax. State Detail You select the states where you have nexus, and the system pushes your information to each.5Streamlined Sales Tax. Registration FAQ For states outside the system, register individually through each state’s own portal.
Charging the Right Rate
Knowing you owe tax is only half the job. The United States has more than 12,000 separate taxing jurisdictions, each with its own rate, and rates change constantly.
Destination Sourcing
For remote sellers, the near-universal rule is destination sourcing: you charge the combined state, county, city, and special-district rate at the buyer’s delivery address. Around 30-plus states and the District of Columbia use destination sourcing for interstate sales. A few states apply origin sourcing to in-state sellers, but they switch to destination sourcing when the seller is out of state. In practice, shipping across state lines means using the buyer’s address.
Destination sourcing is simple in concept and demanding in execution. Two addresses a mile apart can fall in different tax districts with meaningfully different rates. A ZIP code is not precise enough because a single ZIP can span multiple jurisdictions. Reliable compliance takes tax calculation software that resolves the full street address to the correct combined rate.
Shipping Charges
Whether sales tax applies to shipping and handling depends entirely on the destination state, and the rules are all over the map. Some states tax delivery charges whenever the underlying product is taxable. Others exempt shipping if it’s separately stated on the invoice. A few distinguish between U.S. Postal Service delivery (often exempt if separately stated) and private carriers like UPS or FedEx (often taxable). Some states tax combined “shipping and handling” but exempt standalone “shipping.” Treat shipping taxability as a per-state question and configure your software accordingly.
Product Taxability
Every state decides independently which products and services are taxable. Clothing is exempt in some states and taxable in others. Digital goods, food, software subscriptions, and professional services all get different treatment depending on the buyer’s location. Apply the destination state’s taxability rules to each product you sell; the right rate on an exempt item is still an incorrect charge.
Filing Returns and Remitting Tax
Registration commits you to a filing schedule. Each state assigns a frequency, typically monthly, quarterly, or annually, based on your sales volume there. High-volume sellers land on monthly schedules; newer registrants with modest sales often start quarterly or annually. The state notifies you of your frequency and deadlines when it issues the permit.
The return reports your total gross sales, deductions for exempt and resale transactions, and the net taxable sales that generated the tax you collected. Payment is almost always electronic, usually ACH debit or credit, and many states prohibit paper checks above a certain size.
One detail trips up new filers: you must file a return even when you had zero sales in the state for the period. Skipping generates a delinquency notice, and some states will estimate your liability and bill you based on that estimate. The only way to stop filing is to formally close the tax account.
On the positive side, roughly half the states offer a small vendor discount for filing and paying on time, typically 1% to 5% of the tax collected, often with a dollar cap per period. Small, but free money for doing what’s already required.
Resale and Exemption Certificates
Not every sale triggers a collection obligation. When a buyer purchases goods for resale rather than personal use, the transaction is generally exempt. The buyer will collect tax from the end consumer. But the burden of proving the sale qualifies falls on you.
Before the sale, get a valid resale or exemption certificate from the buyer. It should include the buyer’s name and address, their sales tax permit number (or an explanation of why they don’t have one), a description of the goods, a statement that the purchase is for resale, and the buyer’s signature. If you’re audited and can’t produce a valid certificate, the state will treat the sale as taxable and hold you liable for the uncollected tax.
The Multistate Tax Commission’s Uniform Sales and Use Tax Resale Certificate is accepted by 36 states, so one properly completed form can cover most wholesale transactions.6Multistate Tax Commission. Uniform Sales and Use Tax Resale Certificate – Multijurisdiction Confirm the buyer’s state is on the accepted list before relying on it.
Penalties and Coming Forward Late
The cost of ignoring sales tax obligations is steeper than most sellers expect. States impose penalties for late filing, late payment, and failure to register, and interest accrues from the original due date, not the date you’re caught.
- Late filing or payment penalties commonly start around 5% to 10% of the tax due for the first month and increase 1% or so per additional month, often capped at 25% to 30%.
- Substantial underreporting can add another penalty, commonly around 10%, when the shortfall exceeds a set share of the total tax.
- Fraud penalties can reach 50% to 200% of the unpaid tax, with elevated interest.
Most states impose a lookback period of three to four years when auditing remote sellers who never registered. A state discovering you should have been collecting since 2022 can assess every dollar you should have collected during that window, plus penalties and interest on each filing period.7Multistate Tax Commission. Lookback Periods for States Participating in National Nexus Program
If you realize you’ve been selling into a state without collecting, coming forward voluntarily is almost always better than waiting. Most states offer voluntary disclosure agreements through the Multistate Tax Commission’s National Nexus Program or their own departments of revenue. In exchange for registering and starting to collect, the state typically limits the lookback to three or four years and waives some or all of the late-filing and late-payment penalties. You still owe the underlying tax and interest, but the penalty relief can save thousands. The catch: you must approach the state first. Once an audit notice arrives, the voluntary disclosure option is gone.