Sales tax in the United States is collected by three parties: retail businesses selling directly to customers, online marketplace platforms handling sales for their third-party sellers, and — when neither of those applies — the buyer, through a parallel obligation called use tax. Forty-five states and the District of Columbia impose a sales tax; Alaska, Delaware, Montana, New Hampshire, and Oregon do not have a statewide sales tax, so no one collects it on purchases made there. Whoever collects the money holds it for the state and local governments that set the rates and enforce the rules.
Storefront and Service Businesses
Traditional retailers are the most familiar collectors. Shops, restaurants, auto repair garages, and hair salons add the applicable tax to the price at checkout, take the full amount from the customer, and later send the tax portion to the state.
That money is never the business’s revenue. It is held in trust for the government. If a business spends collected sales tax on its own operations, the owner can face personal liability for the missing funds, along with penalties and potential criminal charges.
A business only has to collect once it has “nexus” — a sufficient connection to the state doing the taxing. For a brick-and-mortar operation, nexus comes from physical presence: a storefront, an office, a warehouse, or even inventory sitting in a third-party fulfillment facility. Employees or sales representatives working in a state can also create the connection, even without a retail location there. Once nexus exists, the business registers with the state, collects tax on every taxable sale, and remits it on the schedule the state assigns.
Online Marketplaces
When you buy something on Amazon, eBay, or Etsy, the platform itself — not the individual seller — usually handles the sales tax. Every state that imposes a sales tax, plus the District of Columbia, now has a marketplace facilitator law. These laws make the platform legally responsible for calculating, collecting, and remitting tax on behalf of the third-party sellers who list there.
The reasoning is practical. Large platforms host thousands of small sellers, most of whom cannot reasonably track tax rules in dozens of jurisdictions. Putting the duty on the platform produces uniform collection regardless of who the underlying seller is. The platform looks at the buyer’s location, applies the correct rate, and sends the tax to the state directly.
If you sell only through a marketplace that collects on your behalf, you generally have no separate sales tax filing obligation for those sales. Sell anywhere else, though — your own website, a craft fair, any channel outside the platform — and you are back on the hook for those direct sales yourself. Many states also still require marketplace sellers to keep an active sales tax registration even when the platform is doing the collecting, so the specific state rules matter.
Remote Sellers Without a Marketplace
A seller who ships to customers in another state, with no store or warehouse there and no marketplace handling the tax, can still be required to collect. Before 2018, physical presence was the general standard. The Supreme Court changed that in South Dakota v. Wayfair, Inc., holding that a state can require tax collection based on the seller’s economic activity in the state alone.
The South Dakota law upheld in the case set the threshold at more than $100,000 in sales or 200 or more transactions delivered into the state in a year. Most states adopted similar thresholds after the decision, though the rules have kept shifting. Roughly half of states with sales tax now use only a dollar threshold, commonly $100,000 but sometimes higher, and have dropped the transaction count. The rest still combine a dollar amount with a transaction count. A few states set their dollar threshold well above $100,000. Because these numbers vary and continue to change, any business shipping across state lines needs to watch the thresholds in every state where its customers are.
Which Rate Gets Charged
Once a remote seller crosses the threshold and must collect, the next question is the rate. Most states use destination-based sourcing: the rate is set by where the buyer receives the goods, meaning the shipping address. About a dozen states use origin-based sourcing, tying the rate to the seller’s location. For sellers shipping nationwide, destination sourcing dominates, and it typically requires tracking rates for every city and county the seller ships into, since local jurisdictions layer their own tax on top of the state rate.
States Without a Sales Tax
Purchases made in Alaska, Delaware, Montana, New Hampshire, and Oregon are not subject to a statewide sales tax, so no seller collects one on the state’s behalf. That does not automatically clear a buyer who lives elsewhere: if you bring the goods home to a state that does impose the tax, your own state’s use tax rules may still apply.
When the Buyer Owes It: Use Tax
If neither a retailer nor a marketplace collects sales tax on a taxable purchase — for instance, when you buy from a small out-of-state seller that has not hit the economic nexus threshold — the obligation shifts to you. Use tax is the counterpart to sales tax and applies to taxable goods you buy, store, or use in your state without having paid sales tax on them.
Most states put a use tax line on the individual income tax return, letting residents report and pay tax on untaxed purchases from the prior year. Compliance among individual consumers is very low, in part because many people do not know the obligation exists. Use tax is enforced more consistently against businesses and against individuals registering high-value property such as vehicles or boats, where the state can verify at registration whether sales tax was paid.
Skipping use tax can produce penalties and interest if it turns up in an audit. States rarely audit individual consumers over small purchases, but businesses buying supplies or equipment from out-of-state vendors face a meaningful audit risk. The mechanism exists so that buying from an out-of-state seller does not become a way to avoid tax the state would otherwise have received.
Where the Money Ends Up
State departments of revenue are the agencies that receive the tax and enforce the rules. They decide what is taxable, publish rate schedules, process returns, issue refunds, and run audits. When a collector fails to remit what it took in, the department can assess the unpaid amount, add penalties and interest, place liens on business assets, and in serious cases pull the sales tax permit.
Cities, counties, and special districts often add their own sales tax on top of the state rate, which is why the combined rate can shift from one zip code to the next inside the same state. The seller charges the combined amount in a single transaction. Depending on how the state is organized, the seller either remits everything to a state agency that distributes the local shares or sends money to state and local authorities separately.