Yes, you have to charge sales tax for out-of-state customers whenever your business has “nexus” in the customer’s state. Nexus is the legal connection that lets a state treat you as a tax collector, and it comes from either a physical presence in the state or from selling enough into it to cross an economic threshold, most commonly $100,000 in annual sales. If you don’t have nexus in the buyer’s state, you don’t charge that state’s sales tax. If you do, you must register there, collect at the correct local rate, and remit what you’ve collected.
When You Have Nexus in Another State
Two kinds of activity create nexus, and either one on its own is enough.
Physical Nexus
Physical nexus comes from any tangible presence in a state. An office, retail location, warehouse, or distribution center all qualify. So does inventory held in a third-party fulfillment center, which is how sellers using Amazon FBA often end up with nexus in states they never chose. Employees and contractors working in a state can trigger it too, including sales reps visiting customers, technicians performing installations, and in some cases workers staffing a trade show. The specific duration required varies by state, but any business activity performed on your behalf inside a state’s borders is the kind of thing that counts.
Economic Nexus
Since the Supreme Court’s 2018 decision in South Dakota v. Wayfair, states can also require you to collect based purely on sales volume, with no physical presence involved.1Supreme Court of the United States. South Dakota v. Wayfair, Inc., Et Al. Every state with a sales tax now has an economic nexus law, and the most common threshold is $100,000 in annual gross sales into the state. A few states set the bar higher: California, for example, uses $500,000.
Many states originally paired the dollar threshold with a second trigger of 200 separate transactions, but most have dropped it. As of mid-2025, about 16 states plus the District of Columbia still use a transaction-count threshold alongside the dollar amount.
The measurement period is usually the current or preceding calendar year, and once you cross the line, the obligation to register and collect typically begins within 30 to 90 days. That window is tight, so you need a way to track cumulative sales into each state as they happen. Realizing six months later that you crossed a threshold creates an expensive cleanup.
The Five States With No Sales Tax
Alaska, Delaware, Montana, New Hampshire, and Oregon impose no general statewide sales tax, so there is nothing to collect on sales into those states for most transactions. Alaska is a partial exception because some local jurisdictions there run their own sales taxes, but no statewide tax applies.
Which Rate You Charge
Once you have nexus somewhere, the next question is which rate applies. Sales tax rates stack: a state rate, a county rate, often a city rate, and sometimes a special district rate. A single state can contain thousands of distinct combined-rate jurisdictions.
About a dozen states use origin-based sourcing for their in-state sellers, which bases the rate on where the seller ships from. For remote sellers who established nexus through economic activity, though, those same states almost always require destination-based sourcing. So if you’re selling across state lines, the practical rule is that you calculate tax using the customer’s delivery address.
Destination sourcing is unforgiving about precision. The rate can change from one side of a street to the other when city or district lines run through a neighborhood, so you need the full delivery address, not just the ZIP code. This is where sales tax automation software becomes less of a convenience and more of a requirement: it maps each address to the overlapping jurisdictions and returns the combined rate at checkout.
Whether Your Product or Service Is Taxable
Nexus and rates still don’t tell you whether a given sale is taxable. That depends on what you’re selling and the rules of the state receiving it.
Physical goods are taxable in most states unless a specific exemption applies. Common exemptions cover groceries, prescription medicine, and clothing, but the details are inconsistent: some states tax groceries at a reduced rate, and some exempt children’s clothing while taxing adult clothing.
Digital products are the messiest category. Downloaded software, e-books, streaming subscriptions, and digital music are treated differently from state to state. Some states tax all digital goods as if they were physical products, others tax only certain categories, and a few exempt them entirely. If you sell digital goods, you need to check taxability in every state where you have nexus.
Services are shifting fastest. Most states historically taxed goods but not services, and that is changing. Services tied to physical property, such as repair, installation, and maintenance, are commonly taxable. Professional services like consulting, legal work, and accounting are generally exempt, though a growing number of states are expanding their tax base to include them. Verify your specific service category against each state’s rules.
Registering and Filing
You must register for a sales tax permit in a state before you start collecting. Collecting without a permit is itself a violation. Registration is typically done online through the state’s department of revenue, and most states charge no fee. A few charge nominal fees in the $10 to $25 range, and some require a refundable security deposit or surety bond for certain business types.
If you have nexus in several states, the Streamlined Sales Tax Registration System lets you register in all 23 member states through a single online application at no cost.2Streamlined Sales Tax. Remote Sellers Member states include Indiana, Michigan, Minnesota, New Jersey, North Carolina, Ohio, Washington, and Wisconsin, among others.3Streamlined Sales Tax. Streamlined Sales Tax Home You’ll register individually for any state outside the agreement.
After registering, you file periodic returns and remit the collected tax. The state assigns your filing frequency based on volume: high-volume sellers file monthly, moderate sellers quarterly, and low-volume sellers sometimes annually. The most common due date for monthly filers is the 20th of the following month, though states vary. Each return reports total sales into the state, taxable sales, exempt sales, and tax collected. Late filings commonly trigger penalties of 5% to 25% of the unpaid tax, plus interest.
One modest offset: roughly 30 states offer a vendor compensation discount for filing and paying on time, typically between 0.5% and 5% of the tax collected. Remote sellers who qualify as CSP-compensated sellers in Streamlined member states can also access free tax calculation and filing through certified service providers.4Streamlined Sales Tax. Free Services
Selling Through Amazon, Etsy, and Other Marketplaces
If your out-of-state sales go through platforms like Amazon, eBay, Etsy, or Walmart Marketplace, much of this is already handled. Nearly every state with a sales tax has enacted marketplace facilitator laws that make the platform legally responsible for calculating, collecting, and remitting sales tax on sales it facilitates. You generally don’t need to register separately in states where all your sales flow through the facilitator.
The relief only covers the platform’s own sales. If you also sell through your own website, those sales count separately toward each state’s economic nexus thresholds. A seller doing $80,000 through Amazon and $30,000 through their own Shopify store doesn’t count the $80,000 toward personal nexus, but the $30,000 does count. If those independent sales cross a state’s threshold, you have to register and collect on them yourself.
Keep the detailed tax reports the platform provides even when it handles remittance. You need them to reconcile your books and separate your actual revenue from tax collected on your behalf, which is never your income.
Exempt Sales and Resale Certificates
Not every sale will be taxable even where you have nexus. Businesses buying goods for resale, manufacturing inputs, or other exempt purposes can give you a resale or exemption certificate, and you should accept it and not charge tax on that sale.
If you accept a properly completed certificate in good faith and it later turns out to be invalid, most states protect you from liability for the uncollected tax. Good faith means you didn’t know and had no reason to know it was false. You’re generally not required to verify the buyer’s registration number, though Georgia is a notable exception.5Streamlined Sales Tax. Exemptions
For buyers in multiple states, the Multistate Tax Commission publishes a Uniform Sales and Use Tax Resale Certificate that is accepted across dozens of states on a single form.6Multistate Tax Commission. Uniform Sales and Use Tax Resale Certificate – Multijurisdiction Keep copies of every certificate you accept; retention requirements vary, but three to four years from the transaction date is a safe baseline. If an auditor asks for a certificate and you can’t produce it, you’ll owe the tax yourself.
If You Should Have Been Collecting and Weren’t
If you’ve been selling into states where you had nexus without collecting tax, you’re personally on the hook for the uncollected amount plus interest and penalties. States treat sales tax as a trust fund tax: money you were supposed to collect from customers and hold for the state. Failing to collect it doesn’t erase the liability; it just means the money comes out of your pocket instead.
The usual way to clean this up is a voluntary disclosure agreement, or VDA. Most states offer them, and the Multistate Tax Commission coordinates a multistate version that lets you negotiate with several states through a single application at no cost.7Multistate Tax Commission. Multistate Voluntary Disclosure Program You come forward, agree to register and collect going forward, and file returns for a limited lookback period. In exchange, the state waives penalties and limits how far back it can reach.
The lookback period for sales tax is typically three to four years, though it varies by state.8Multistate Tax Commission. Lookback Periods for States Participating in National Nexus Program You still owe the back tax and interest for that period, but having penalties waived and older years forgiven can save a business a great deal. The one hard rule is that you have to come forward before the state contacts you. Once a state opens an inquiry or sends a notice, you’re no longer eligible for voluntary disclosure there.