Whether you charge sales tax on items shipped out of state depends on whether you have “nexus” in the buyer’s state. Nexus is your legal connection to that state, and it comes in two flavors: a physical presence there, or enough sales volume into the state to cross its economic threshold. If you have nexus, you collect the buyer’s state and local sales tax on the shipment. If you don’t, you generally have no duty to collect, and the buyer technically owes use tax instead. Five states have no state sales tax at all, so shipments there carry no state-level obligation regardless of your situation.
That’s the whole framework. The rest is figuring out which states you have nexus in and what to do about it.
What Creates Physical Nexus
Any tangible presence in a state generally creates nexus there, no matter how small your revenue. The usual triggers:
- A business location of any kind — office, retail store, or warehouse.
- Employees or contractors, including staff who travel into the state for sales calls, installations, or service work.
- Inventory sitting in a third-party fulfillment center, including Amazon FBA warehouses. Nexus attaches to the state where the inventory physically sits.
- Trade show activity, which can trigger temporary nexus in some jurisdictions when you take orders on site.
The inventory trigger catches e-commerce sellers off guard. Amazon distributes FBA inventory across warehouses in dozens of states based on its own logistics, so a seller who ships everything to a single Amazon facility can end up with physical nexus in states they’ve never visited.
Economic Nexus Thresholds by State
Even with no physical presence, your sales volume alone can create nexus. The overwhelmingly common threshold is $100,000 in gross sales delivered into the state during the current or previous calendar year. A few states set a higher bar: California, New York, and Texas each require $500,000, while Alabama and Mississippi set theirs at $250,000.
When these laws first rolled out, most states paired the dollar threshold with a transaction count — collect if you exceed $100,000 or 200 transactions. That transaction count has been falling out of favor. More than fifteen states have eliminated it, including South Dakota, California, Indiana, North Carolina, and Utah. Illinois drops its transaction threshold effective January 1, 2026. Other states still use one, but the trend is clearly toward dollar-only thresholds.
Two details trip sellers up when counting toward these thresholds. Most states measure gross sales, which includes exempt sales and sales for resale, not just taxable sales. And in many states, sales routed through a marketplace like Amazon or Etsy still count toward your own threshold calculation even though the marketplace collected the tax on those transactions. The specifics vary state by state.
When a Marketplace Handles It for You
If you sell through Amazon, eBay, Etsy, Walmart Marketplace, or a similar platform, the collection duty may already be handled. More than 45 sales-tax jurisdictions have enacted marketplace facilitator laws that shift collection and remittance from the individual seller to the platform. The marketplace calculates the tax, collects it from the buyer, and files the returns.
This helps, but it doesn’t eliminate all responsibility. You still need to track where you have nexus for sales made through your own website or other direct channels. Marketplace definitions also vary between states, so before assuming a platform covers you in a given state, confirm it’s actually remitting tax there.
Which Rate to Charge on an Out-of-State Shipment
For interstate shipments, the destination state’s rules almost always control, and virtually all of them use destination-based sourcing. You apply the combined tax rate at the buyer’s delivery address, which layers together state, county, city, and any special district taxes. Two addresses in the same zip code can carry different rates because one falls inside a transit district or school tax zone and the other doesn’t.
Origin-based sourcing (where the rate follows the seller’s location) exists in about ten states, but it almost never applies to sales shipped in from another state. When you ship to a buyer in a state where you have nexus, expect to use their destination rate.
Getting this right manually is impractical at any meaningful volume. Automated tax software uses the buyer’s full address to identify the overlapping jurisdictions and apply the correct combined rate. It also handles product-level exemptions, which vary by state — clothing is exempt in some, groceries in others.
Shipping Charges
Whether shipping is taxable depends on the destination state and how the charge appears on the invoice. The general pattern: if shipping is bundled into the product price, it’s taxable. If it’s a separate line item and the buyer had the option to pick up the item, shipping is often exempt. Deliveries in the seller’s own vehicle tend to be taxable in more states than shipments sent by common carrier. There’s enough variation that your software or advisor should handle this per transaction.
Registering Before You Collect
Once you cross a nexus threshold, register with the state’s tax authority before you start collecting. Collecting tax without a valid permit exposes you to penalties, because until you’re registered the state considers those funds unauthorized. Most state sales tax permits are free, though a few states charge small fees or require refundable security deposits.
Registering individually with dozens of states is tedious. The Streamlined Sales and Use Tax Agreement offers a central online registration at sstregister.org that covers all 24 member states through a single application.1Streamlined Sales Tax Governing Board. Streamlined Sales Tax Member states cannot charge registration fees to sellers who register through this system.2Streamlined Sales Tax Governing Board. Streamlined Sales and Use Tax Agreement For roughly 20 non-member states, you register directly with each state’s tax agency.
After registering, the state assigns a filing frequency (monthly, quarterly, or annually) based on your volume there. Each return reports total sales, taxable sales, tax collected, and any deductions. Some states offer a small vendor discount, often under 1% of tax collected, for filing and paying on time. Missing a deadline triggers penalties in every state, and interest accrues on top. A single late return in a low-volume state is manageable; missing returns across multiple states compounds fast.
Exemption Certificates
Not every sale into a nexus state requires tax. Sales to resellers, nonprofits, and government agencies are exempt in most states, but only if you have a valid exemption certificate on file. Without that documentation, you’re liable for the uncollected tax if the state audits you.
The Multistate Tax Commission publishes a Uniform Sales and Use Tax Exemption Certificate designed for multi-state use. Several states accept it, though the MTC notes acceptance is not guaranteed and states can change their policies.3Multistate Tax Commission. FAQ – Uniform Sales and Use Tax Certificate Multijurisdictional Some states require their own form. Collect the certificate at or before the sale, confirm it’s completed properly, and retain it for at least three years from your last return that referenced it.
What Happens If You’ve Been Ignoring This
States are getting better at identifying non-compliant sellers through marketplace data, payment processor records, and information-sharing with other states. When they catch up, the consequences follow a predictable pattern: back taxes on every sale that should have been taxed, interest from the original due date, and penalties on top.
How far back the state can reach varies. Most states in the Multistate Tax Commission’s Voluntary Disclosure Program use a 36-month lookback for sales tax, though several extend it to 48 months. A few states reach further for sellers who collected tax but failed to remit it.4Multistate Tax Commission. Lookback Periods for States Participating in National Nexus Program
If you’re behind and want to come into compliance before the state finds you, a Voluntary Disclosure Agreement is usually the best path. The MTC’s multistate program currently covers 38 jurisdictions and lets you negotiate VDAs with multiple states at once. The core deal: you register, file returns, and pay back taxes plus interest for the lookback period, and in exchange the state waives some or all penalties and won’t reach further back. Your identity stays confidential until the agreement is finalized, which prevents your disclosure attempt from triggering the audit you’re trying to avoid.5Multistate Tax Commission. Nexus FAQ
That protection disappears once a state contacts you first. If you receive an audit notice or a nexus questionnaire from a state, the VDA option is generally off the table there.
The Five States With No Sales Tax
Shipments to buyers in Alaska, Delaware, Montana, New Hampshire, and Oregon carry no state sales tax obligation regardless of your nexus status. Alaska is a partial exception: it has no state sales tax, but some Alaska localities impose their own sales taxes, and the Alaska Remote Seller Sales Tax Commission administers economic nexus rules for those local taxes. For the other four states, no state sales tax means no collection duty at the state or local level.