If you ship to customers in other states, you have to charge sales tax when selling out of state in any state where your business has “nexus,” which is a legal connection based on either a physical presence or enough sales volume in that state. Forty-five states and the District of Columbia impose a sales tax, and each one sets its own rules for when a remote seller must register, collect, and remit.1Tax Foundation. State and Local Sales Tax Rates, 2026 Alaska, Delaware, Montana, New Hampshire, and Oregon have no statewide sales tax, so shipments to buyers there don’t create a state-level collection obligation.
What Actually Triggers the Obligation
A state can only require you to collect its sales tax if you have nexus there. There are two ways to get it.
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 sitting in a third-party fulfillment center. Sellers who use Fulfillment by Amazon often discover physical nexus in states they never intended to touch, because Amazon distributed their inventory across its warehouse network. Temporary activity can count too. A trade show, an on-site repair visit, or a pop-up shop may create physical nexus depending on the state and the length of the activity.
Economic nexus is the standard that reshaped online selling. In 2018, the U.S. Supreme Court held in South Dakota v. Wayfair that a state could require remote sellers to collect its sales tax based on sales volume alone, with no physical presence required.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, and the compliance burden sits with the seller.
How Much You Have to Sell Before It Kicks In
The most common threshold mirrors South Dakota’s original: $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 you owe collection. Uniformity ends there.
A growing number of states have scrapped the 200-transaction test. Alaska and Utah dropped it in 2025, and Illinois followed on January 1, 2026. That change matters most for sellers moving high volumes of low-priced items, who could previously trigger nexus with modest revenue.
“Sales” also doesn’t mean the same thing everywhere. Most states count all gross sales shipped in, including exempt and resale sales, when measuring against the threshold. A handful, including Arkansas, Florida, Missouri, and North Dakota, count only taxable sales. If you ship $80,000 in taxable goods and $30,000 in exempt goods into a gross-sales state, you’ve crossed $100,000. In a taxable-sales state, you haven’t.
Watch the measurement period, too. Most states look at either the current calendar year or the immediately preceding twelve months, and once you cross the line, collection often begins on the first day of the following month.3Streamlined Sales Tax. Remote Seller State Guidance A once-a-year review isn’t enough; you need to track your state-by-state sales continuously.
When the Marketplace Collects For You
If you sell through Amazon, Etsy, eBay, Walmart Marketplace, or a similar platform, the marketplace itself almost certainly collects and remits sales tax on your behalf. Every state with a sales tax has enacted a marketplace facilitator law making the platform responsible for tax on sales it processes. The platform calculates the rate, charges the buyer, and sends the money to the state. For those transactions, you generally don’t need to do anything.
Two caveats matter. First, some states still require you to register and file returns even when the marketplace collected every dollar. New York is a well-known example. Second, the facilitator law only covers sales made through the platform. If you also sell through your own Shopify store, direct invoices, or in-person at craft fairs, those sales are entirely your responsibility wherever you have nexus.
Figuring Out the Right Rate
Knowing you owe tax is only half the job. Getting the amount right depends on where the sale is “located” for tax purposes. The United States has more than 12,000 separate taxing jurisdictions, each with its own combined rate.
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. A few states use origin-based sourcing for sellers located within their borders, but they switch to destination sourcing when the seller is out of state. If you’re shipping across state lines, plan on using the buyer’s address to determine the rate in virtually every case.
This is simple in concept and demanding in practice. Two addresses a mile apart can fall in different tax districts at meaningfully different rates. A ZIP code isn’t precise enough, because one ZIP code can span multiple jurisdictions. Reliable compliance really requires tax calculation software that resolves the full street address.
Shipping Charges
Whether sales tax applies to shipping and handling depends on the destination state, and the rules are all over the place. Some states tax delivery charges whenever the underlying product is taxable. Others exempt shipping when it’s separately stated on the invoice. A few distinguish USPS delivery (often exempt if separately stated) from private carriers like UPS or FedEx (often taxable). Some tax combined “shipping and handling” but exempt standalone “shipping.” Treat it as a per-state question and configure your tax software accordingly.
Product Taxability
Each 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 item you sell. Charging the right rate on an exempt product still produces an incorrect invoice.
Register Before You Collect Anything
Once you have nexus in a state, you must get a sales tax permit before you charge 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 not complicated. Each state’s department of revenue will want your business’s legal name, federal employer identification number or Social Security number, physical address, the date nexus was established, and basic information about expected sales volume. Most states handle registration online and issue the permit within a few days. Fees are usually nothing or a small amount.
If you need to register in several states at once, the Streamlined Sales Tax Registration System lets you submit a single application covering the 23 full member states of the Streamlined Sales and Use Tax Agreement.4Streamlined Sales Tax. State Detail You can add or drop states later, and business-information updates propagate to every registered state at once.5Streamlined Sales Tax. Registration FAQ For non-member states, you register through each state’s own portal.
Wholesale and Other Exempt Sales
Not every sale is taxable. When a buyer purchases goods for resale rather than personal use, the transaction is generally exempt. The buyer collects tax from the end consumer instead. But the burden of proving the exemption is on you.
Get a valid resale or exemption certificate from the buyer before the sale. It needs to 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 can’t produce a valid certificate in an audit, the state will treat the sale as taxable and hold you liable for the tax you didn’t collect.
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 of your wholesale customers.6Multistate Tax Commission. Uniform Sales and Use Tax Resale Certificate – Multijurisdiction Confirm the buyer’s state is on the accepted list before you rely on it.
Filing and Remitting
Registration puts you on a filing schedule set by the state, usually monthly, quarterly, or annually based on your volume there. The return reports gross sales, deductions for exempt and resale transactions, and the net taxable sales that produced the tax you collected. Payment is almost always electronic, and many states prohibit paper checks above a certain business size.
One detail catches new filers: file a return even in periods when you had zero sales in that state. Skipping generates a delinquency notice, and some states will estimate your liability and bill you based on the estimate. The only way to stop filing is to formally close the tax account.
What It Costs to Ignore the Rules
Penalties for late filing, late payment, and failure to register stack on top of interest that accrues from the original due date. Structures vary, but a common pattern looks like this:
- Late filing or payment: a percentage-based penalty starting around 5% to 10% of the tax due for the first month, rising by roughly 1% each additional month, often capped at 25% to 30%.
- Substantial underreporting: an added penalty, commonly around 10%, when the amount you failed to report exceeds a certain share of the tax owed.
- Fraud: penalties can reach 50% to 200% of the unpaid tax, plus elevated interest rates.
States can also look backward. Most impose a lookback of three to four years when auditing remote sellers who never registered, meaning a state that discovers you should have been collecting since 2022 can assess every dollar you should have collected in that window, plus penalties and interest on each period.7Multistate Tax Commission. Lookback Periods for States Participating in National Nexus Program
If You’re Already Behind
If you realize you should have been collecting in a state and haven’t been, coming forward voluntarily is almost always better than waiting to be caught. 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 late-filing and late-payment penalties. You’ll still owe the underlying tax and interest, but the penalty relief can be substantial. The catch: you have to approach the state before the state contacts you. Once an audit notice arrives, the voluntary disclosure option is gone.