You charge sales tax on items shipped out of state only when you have a legal connection — called nexus — to the buyer’s state. That connection comes from either a physical presence in the state or enough sales volume into it to cross the state’s economic threshold. If you have nexus, you collect the buyer’s state and local tax at the delivery address. If you don’t, you generally have no duty to collect, and five states don’t impose a sales tax at all.
The rest of the answer is about figuring out where you have nexus, at what rate you collect, and what to do about states you’ve been shipping into without collecting.
Physical Presence in the Buyer’s State
Any tangible footprint in a state creates nexus there, regardless of how little you sell into it. The common triggers:
- An office, retail store, or warehouse, even a small one.
- Employees or contractors who travel into the state for sales calls, installations, or service work.
- Inventory stored in the state, including goods sitting in a third-party fulfillment center.
- Trade show activity, which can trigger temporary nexus in some jurisdictions when you take orders over a multi-day event.
The inventory trigger catches e-commerce sellers off guard. Amazon distributes FBA inventory across warehouses in dozens of states based on its own logistics decisions, 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
Even with no physical presence, your sales volume into a state can create nexus on its own. Every state with a sales tax now has an economic nexus law. The most 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 use $500,000, while Alabama and Mississippi set theirs at $250,000.1Supreme Court of the United States. South Dakota v. Wayfair, Inc., 585 U.S. ___ (2018)
When these laws first appeared, most states paired the dollar threshold with a transaction count, so you’d collect once you crossed either $100,000 or 200 transactions. The transaction count is falling out of favor. More than fifteen states have dropped it entirely, including South Dakota, California, Indiana, North Carolina, and Utah. Illinois eliminates its transaction threshold on January 1, 2026. Other states still use one, but the direction of travel is clear.
Two details trip sellers up when they count toward a threshold. Most states measure gross sales, which includes exempt sales and sales for resale, not just taxable ones. And in many states, sales you make through a marketplace like Amazon or Etsy still count toward your own threshold calculation, even though the marketplace handled the tax on those orders. The specifics vary by state, so check each one directly.
When the Marketplace Collects for You
If you sell through Amazon, eBay, Etsy, Walmart Marketplace, or a similar platform, you may already be covered on those sales. More than 45 jurisdictions have enacted marketplace facilitator laws that shift the collection and remittance obligation from the individual seller to the platform. The marketplace calculates the tax, charges the buyer, and files the returns.
This is real relief, but it doesn’t erase your own responsibility. You still have to track nexus for sales you make through your own website or other direct channels. Marketplace definitions also vary, and a few states draw the line differently than others. Confirm the platform is actually remitting tax in a given state before assuming you’re clear there.
What Rate to Charge
Once you know you owe tax in a state, you need the right rate for each sale. For shipments crossing state lines, the destination state’s rules control, and essentially all states use destination-based sourcing for those sales. You apply the combined rate at the buyer’s delivery address, which layers state, county, city, and special district taxes together.
Two addresses in the same ZIP code can carry different rates because one falls inside a transit or school tax district and the other doesn’t. Doing this by hand at any real volume isn’t practical. Automated tax calculation software uses the buyer’s full address to identify the overlapping jurisdictions and apply the right combined rate, and it also handles product-level quirks like clothing being exempt in some states and groceries in others.
Origin-based sourcing exists, but it applies to sales shipped within a seller’s own state in about ten states (Arizona, Illinois, Missouri, Ohio, Pennsylvania, Tennessee, Utah, and Virginia, with California and Texas using a hybrid). For interstate shipments, origin sourcing almost never applies.
Shipping Charges
Whether the shipping charge itself is taxable depends on the destination state and how the invoice is structured. The broad pattern: bundled shipping is usually taxable, and shipping listed separately is often exempt when the buyer could have picked up the item instead. Deliveries in the seller’s own vehicle tend to be taxable in more states than shipments through a common carrier like UPS or USPS. Variation is wide enough that this is a per-transaction call best left to tax software or an advisor.
Digital Products Follow Different Rules
If you sell downloaded music, e-books, streaming subscriptions, SaaS, or similar digital goods across state lines, don’t assume the physical-goods answer carries over. States that follow the Streamlined Sales Tax framework treat prewritten software as taxable whether it ships on a disc or downloads. Coverage of other digital products varies state by state because each one has to pass specific legislation. Cloud-based software gets treated inconsistently — some states don’t tax it as software, others tax it as a service.2National Conference of State Legislatures. Taxation of Digital Products Treat each state as its own research question.
Exempt Sales and Resale Certificates
Not every sale into a state where you have nexus is taxable. 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 paper, you’re on the hook for the uncollected tax if the state audits you.
The Multistate Tax Commission publishes a Uniform Sales and Use Tax Exemption Certificate for multi-state use. Several states accept it, though acceptance is not guaranteed and can change.3Multistate Tax Commission. FAQ – Uniform Sales and Use Tax Certificate Multijurisdictional Some states require their own form instead. Collect the certificate at or before the sale, confirm it’s fully completed, and keep it for at least three years after the last return that referenced it.
Drop Shipping
Drop shipping tangles the question. You take the order, your supplier ships directly to the customer, and three parties can sit in three different states. The tax obligation to the customer follows the delivery state: if you have nexus there, you collect. The sale from your supplier to you should be an exempt wholesale transaction, but your supplier needs a valid resale certificate from you for the delivery state. If you aren’t registered there because you lack nexus, documentation gets complicated. Most states accept a home-state resale certificate or the MTC uniform certificate with your home-state number, but roughly ten states insist on their own form with their own registration number. If the supplier can’t get valid documentation, they may charge you tax on the wholesale leg.
Register Before You Start Collecting
Once you’ve crossed a nexus threshold, register with the state’s tax authority before you charge the first dollar of tax. Collecting without a permit exposes you to penalties because the state considers that money unauthorized until you’re registered. Most state sales tax permits are free, though a few charge small fees or require refundable security deposits.
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.4Streamlined Sales Tax Governing Board. Streamlined Sales Tax Member states can’t charge registration fees to sellers who come in through that system.5Streamlined Sales Tax Governing Board. Streamlined Sales and Use Tax Agreement For the roughly 20 non-member states, you register directly with each agency.
After registration, each state assigns a filing frequency (monthly, quarterly, or annually) based on your volume. Returns report total sales, taxable sales, tax collected, and any deductions. Some states give a small vendor discount, often less than 1% of the tax collected, for filing and paying on time. Missing a deadline triggers penalties and interest in every state, and missed returns across multiple states add up fast.
What Happens If You’ve Been Ignoring This
States are getting better at identifying sellers who should be collecting but aren’t, using marketplace data, payment processor records, and information-sharing with other states. When they catch up, you owe back taxes on every sale that should have been taxed, interest from the original due dates, and penalties on top.
The lookback window varies. Most states that participate in the Multistate Tax Commission’s Voluntary Disclosure Program use a 36-month lookback for sales tax, though several extend it to 48 months, and a few reach further for sellers who collected tax and never remitted it.6Multistate Tax Commission. Lookback Periods for States Participating in National Nexus Program
If you’ve been selling into a state without collecting and want to clean it up before the state finds you, a Voluntary Disclosure Agreement is usually the best path. Through the MTC’s multistate program, which currently covers 38 jurisdictions, you can negotiate VDAs with several states at once. In exchange for registering, filing, and paying back taxes plus interest for the lookback period, the state waives some or all penalties and agrees not to reach back further.7Multistate Tax Commission. Nexus FAQ Your identity stays confidential until the agreement is finalized, so disclosing doesn’t itself trigger an audit.
That protection vanishes the moment the state contacts you first. If you receive an audit notice or a nexus questionnaire, the VDA door is usually closed for that state.
States With No Sales Tax
Five states impose no state-level sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. Shipments to buyers in those states carry no state sales tax duty regardless of your nexus. Alaska is a partial exception: it has no state sales tax, but some Alaska local governments impose their own, and the Alaska Remote Seller Sales Tax Commission administers economic nexus rules for those localities. For the other four, no sales tax means no collection duty at any level.