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If you’re selling to the U.S. market through an e-commerce store like Shopify, Amazon, Etsy, or WooCommerce, you may have come across the term “sales tax.”
But understanding sales tax is about more than simply adding a percentage to your customers’ purchases.
Sales tax rules vary from state to state, and your business may have different registration, collection, filing, and reporting obligations depending on where you sell and where your customers are located.
Compliance letter from the new California Department of Tax and Fee Administration (Source: TaxJar)
Getting these requirements wrong can lead to unexpected tax liabilities, penalties, and compliance issues.
In this guide, our tax accounting experts will break down
- How U.S. sales tax works;
- When you may need to register and collect sales tax, and;
- What your business needs to know to stay compliant;
- Key factors you should consider across different states so you can manage your sales tax obligations with greater confidence.
If you are ready to be compliant, let’s get into it.
1. Key takeaways
- Sales tax in the U.S. is a tax on goods and services. It is determined based on physical nexus and economic nexus;
- Businesses must collect sales tax if they have a connection (nexus) to a state, such as having an office, or warehouse, or reaching a certain sales threshold (for online sellers from overseas or from one state to another state);
- Businesses must prepare, file tax returns, and pay the correct amount of tax to the state government;
- Global Link Asia Consulting will help you stay compliant and avoid costly mistakes with sales tax laws.
2. How to track sales tax in the US using sales tax calculators?
If you’re just starting to track U.S. sales tax, tools like Avalara and TaxJar can help you check the applicable rate for a specific location, such as a ZIP code.
We recommend these two U.S. sales tax solutions:
- Avalara: Helps determine location-specific sales tax rates and can integrate with e-commerce platforms to automate tax calculations and collection.
- TaxJar: Provides sales tax calculations and reporting tools, making it a practical option for online sellers who need more than a basic rate lookup.
TaxJar sales tax calculator
Our suggestion if you like to go extra step
If you manage hundreds or thousands of products, checking sales tax manually for each product and location quickly becomes inefficient. That’s when it makes sense to invest in the automated tax solutions offered by Avalara or TaxJar, which can handle calculations and tax workflows at scale.
Their services, such as Avalara Returns and TaxJar AutoFile, can automate the preparation, filing, and remittance of sales tax returns, helping reduce manual work and keep your tax compliance process on track.
For businesses with a strong IT team, building an in-house solution with AI is another option. We have seen our clients pull this off, and you can do the same too. However, it requires continuous updates as state and local tax rules change.
Ann - Tax expert of Global Link Asia Consulting
3. What is sales tax in the US?
Sales tax is a consumption tax charged on certain sales of goods and services. It’s typically added to the purchase price, collected from the customer at checkout, and then remitted to the appropriate tax authority.
You’ve probably paid sales tax as a consumer. If you’re an overseas seller, you may know it by other names, such as VAT (value-added tax) or GST (goods and services tax). Once you start selling products or services, these consumption taxes become a business responsibility, and compliance can get complicated quickly.
Unlike many countries, the U.S. has no federal sales tax. Instead, sales tax is imposed and administered by individual states and local jurisdictions, including cities, counties, and special districts.
Overview of sales tax in the U.S (Source: Avalara)
4. How does sales tax work?
Sales tax authorities calculate tax by applying a percentage to the transaction amount. The applicable jurisdiction determines the rate based on the sale’s location, the product or service, and local rules.
For example, a customer buys a taxable product for $100.
- The applicable jurisdiction charges a combined sales tax rate of 7.5%;
- The customer pays $107.50;
- The seller collects $7.50 in sales tax and remits it to the relevant tax authority.
5. Why Is U.S. sales tax So complicated?
Sales tax compliance involves more than simply adding a percentage to your checkout price.
Businesses may need to determine:
- Whether a product or service is taxable
- Which sales tax rate appliesWhere the transaction is sourced
- Whether the business has sales tax nexus
- How much tax to collect
- When and where to file returns
- How to remit the tax collected
Rates and rules can also change over time. For businesses selling across multiple states or managing hundreds or thousands of products tracking these requirements manually can quickly become a full-time task.
One of our customers learned this the hard way. They had operated an online clothing store on Amazon for five years without realizing they were required to collect and remit sales tax in the states where they sold.
By the time they received letters from tax authorities in 10 states, they understood how serious the situation had become. The unpaid tax had accumulated over five years, leaving them to work with multiple tax authorities to arrange payment over time. With our support, they communicated with the authorities and developed a plan to address the outstanding obligations.
Our suggestion to all our clients when they contacted us is the same: Preparation is key. When you decide to open a company and sell in the U.S., consider compliance, tax, and other regulatory requirements from the start
6. Which states have sales tax?
Most U.S. states impose a general sales tax, and many also allow local governments to add their own rates.
There are currently 4 states without a general statewide sales tax: Delaware, Montana, New Hampshire, and Oregon.
However, “no statewide sales tax” doesn’t always mean zero tax on every transaction. Alaska, for example, allows local governments to impose sales taxes, while several of these states tax specific goods or services.
The result? The U.S. has thousands of sales tax jurisdictions, each with potentially different rates, rules, and taxable products. That’s what makes sales tax challenging for online sellers.
District sales and use tax rates in California
7. What is the difference between sales tax and others similar taxes?
7.1. What is the difference between sales tax and excise tax?
In some states in the U.S., you will find another tax on goods and services, which is called excise tax, besides sales tax.
Excise tax is a specific tax applied to particular goods like gasoline, tobacco, and alcohol, while sales tax applies broadly to most retail transactions.
Unlike sales tax, excise tax is often included in the price of the product rather than added at checkout.
For example, Delaware has no state or local sales tax, but it does impose federal excise taxes on certain goods such as alcoholic beverages and cigarettes. This means that while general retail purchases are tax-free, specific products are still subject to additional taxation.
7.2. What is the difference between sales tax and use tax?
Sales tax and use tax cover similar transactions, but they’re triggered in different ways. The simplest distinction is who is responsible for paying and reporting the tax.
The buyer ultimately pays sales tax, while the seller generally collects it at checkout and remits it to the appropriate tax authority.
However, the seller’s liability can vary depending on whether the state follows a consumer tax (vendee) or seller privilege (vendor) model.
| Type of model | What is it |
| Vendee or Consumer tax states | In a vendee state, sales tax is imposed on the buyer. The seller collects the tax and separately states it on the invoice or receipt. Because the seller is collecting tax on the government’s behalf, sales tax is often treated as a trust tax. If the correct amount isn’t collected or remitted, the buyer or seller may be held liable, depending on the state’s rules. California and Texas are examples of states that follow the consumer tax model. |
| Vendor or Seller Privilege states | In a vendor state, the tax is imposed on the business for the privilege of conducting business in the state. The seller can generally choose to absorb the tax rather than charge it separately to the customer. In these states, the tax authority generally holds the seller responsible for unpaid sales tax rather than pursuing the consumer. Arizona, Hawaii, and New Mexico are examples of states that use seller privilege or similar business-level transaction taxes. |
8. What Is a Resale Certificate?
A resale certificate allows a business to buy goods tax-free when those goods are intended for resale. The assumption is that the end customer will pay the sales tax.
The buyer provides the certificate to the seller, while the seller must verify and retain it as proof of the exemption.
Can you use one Resale Certificate in every state?
No. There is no single resale certificate accepted nationwide. Some states accept multistate certificates, such as the Streamlined Sales Tax (SST) Certificate of Exemption or MTC Uniform Sales & Use Tax Resale Certificate, while others require their own state-specific forms.
To obtain a resale certificate, a business generally needs to register for a sales tax permit first.
9. What Is a Sales Tax Exemption Certificate?
A sales tax exemption certificate allows a qualified buyer to purchase goods or services without paying sales tax when the purchase meets a state’s exemption requirements.
The buyer provides the certificate to the seller, and the seller must verify and retain it as proof of the tax-exempt transaction.
10. What is the difference between Exemption Certificate and Resale Certificate?
The key difference is why the purchase is exempt:
- Exemption certificate: The buyer qualifies based on their status or the nature of the purchase.
- Resale certificate: A business purchases goods for resale, with sales tax collected from the end customer later.
11. What is Nexus in sales tax?
Nexus is the most important concept when understanding US sales tax. Nexus determines whether a business must collect and remit sales tax in a particular state.
For the majority of businesses, they need to establish nexus in 2 main ways:
11.1. Physical Nexus
If a business has a tangible presence in a state—such as a storefront, office, warehouse, physical address, or employees—it must collect sales tax in that state.
For example, A U.S.-based business must pay sales tax even without being physically present if:
- It sells on Amazon FBA, where goods are stored in U.S. warehouses.
- It operates a branch, or office, or has employees in the U.S.
- It has a company in Delaware and sells goods to Arizona, where the state applies the sales tax regulations.
11.2. Economic Nexus
Many states have adopted laws requiring remote sellers (Online sellers from other countries, or other US states) to collect sales tax if they exceed a certain threshold of sales or transactions within the state.
For example, a UK seller sells plushies to a US consumer in Texas. He must calculate the tax and report back to the Texas state authority as Texas imposes a 6.25 percent state sales tax rate.
Understanding nexus is crucial for businesses selling across state lines or from overseas countries, especially in e-commerce. Failure to comply with nexus laws can lead to audits and penalties.
That is why, regularly reviewing nexus rules and using automated tax software can help businesses remain compliant.
12. Is the sales tax different state-by-state?
12.1. Overview of state sales tax rates
Each state sets its own sales tax rate, which can range from 0% (as in states like Delaware and Oregon) to over 7%.
Additionally, many states allow local governments to impose additional sales taxes, which can significantly increase the total tax rate. (over 9%)
For example, in 2024, the state tax rate of Washington is 6,5%, and the local sales tax averages 2,8%, making the combined state tax goes up to 9,38%.
12.2. Notable state-specific exemptions
Certain products and services are exempt from sales tax depending on the state. For example, groceries, prescription medications, and clothing may be tax-exempt in some states but fully taxable in others.
Delaware is a key example of this state-specific exemption, the state does not impose any sales tax, but the neighboring state New Jersey has a sales tax policy of 6,25%.
To ensure compliance and avoid unexpected liabilities, it's crucial to understand how to manage sales tax effectively.
In the next section, we’ll explore strategies to handle sales tax properly and avoid costly mistakes.
13. How to manage sales tax to avoid costly mistakes and stay compliant online?
Managing sales tax is the most omitted part of any seller’s responsibilities when selling overseas, often resulting in costly penalties that can reach thousands of dollars.
After identifying the nexus and understanding the different sales tax rules across states, the next crucial step is ensuring proper tax management.
Your businesses risk non-compliance, audits, and financial penalties without an effective strategy, b
An effective strategy from our US tax expert in Global Link Asia Consulting consists of 5 simple steps: Identifying, Registration, Calculation, Filing and Keeping up with changes.
Before the registration and calculation step, you must first identify in which states your U.S business has tax obligations.
As each state has different tax laws, and failing to identify the correct jurisdictions could lead to either over-collection or underpayment of taxes, both of which can cause financial and legal issues.
In this way, you can ensure you have filed sales taxes in all U.S. states, avoiding non-compliance.
Step to identify sales tax liabilities:
- Identify all states where you have customers purchasing goods or services;
- Review whether you have a physical or economic nexus in each state;
- Once you’ve identified your tax obligations, the next step is to calculate how much sales tax you need to collect and remit.
In this step, you should rely on your accountant who is an expert in US tax and accounting, or outsource to a trusted service provider like Global Link Asia Consulting.
- Identify the state and local tax rates for each sale location.
- Ensure that the product or service sold is taxable in the given jurisdiction.
- Use tax software to precisely calculate the amount of sales tax for each state
For example, to calculate sales tax, multiply the purchase price by the applicable sales tax rate. If an item costs $100 and the sales tax rate is 7%, the total cost would be $107 ($100 + $7 in tax).
After calculation, the next step is registering for a sales tax permit to legally collect and remit sales tax.
Registering for a sales tax permit is a critical step in ensuring compliance with state tax laws.
Without proper registration, your U.S. store can not legally collect sales tax. Global Link Asia Consulting's tax professionals can help you apply for a sales tax permit if you need support.
The steps to register for a sales tax permit are as follows:
- Gather required business documentation such as business name, EIN, and business address;
- Prepare the form and submit your application to apply for a Sales Tax ID online. and await approval. Some states may charge a registration fee;
- Receive your permit.
Once registered, your businesses must fulfill tax obligations by regularly filing sales tax returns.
During your business operation, you must periodically prepare and file your returns. Each state will have a different filing duration.
To file properly, you need to
- Determine the filing frequency of each state (monthly, quarterly, annually);
- Use sales records and accounting software to determine the amount collected;
- Log into the State tax portal and begin filing timely (Enter all the data).
In addition to frequent tax filing, keeping up with tax rate changes is crucial to ensure that businesses apply the correct rates and remain compliant.
Sales tax rates and laws frequently change, requiring businesses to stay updated to avoid compliance issues.
To combat this issue, relying on the support of seasoned tax advisors like Global Link Asia Consulting is always recommended, especially if you are selling to different states in the U.S
We will proactively send email updates on tax rate changes to you so you don't make costly mistakes
Or, you can use any tax software (i.e Turbo Tax) and set up automated reminders of filing and updates so you can do it yourself more easily.
14. How can Global Link Asia Consulting help you avoid hefty fines with U.S sales tax law?
With 10 years of expertise in supporting international entrepreneurs to thrive in the U.S. market, Global Link Asia Consulting provides professional services to help businesses establish and grow successfully while ensuring compliance with U.S. regulations, including sales tax
- Advise businesses on selecting the most suitable U.S. state for company formation;
- Provide comprehensive and professional U.S. company incorporation services;
- Assist sellers in registering for a Sales Tax ID in the U.S;
- Help sellers accurately calculate sales tax in each state where they have tax obligations;
- Prepare and file Sales Tax Returns with state authorities;
- Support the registration, setup, and verification of international payment accounts like Stripe, PayPal Business, PayPal Pro, and others;
- Assist in registering and setting up U.S. bank accounts;
- Offer tax, accounting, and financial reporting services for U.S. sellers and businesses.
15. FAQs about sales tax in the U.S
According to the latest 2026 data from Avalara, 4 U.S. states have no statewide general sales tax: Delaware, Montana, New Hampshire, and Oregon.
When state and local taxes are combined, some states consistently rank among the lowest-tax locations in the U.S.
In short, the states below rank from the lowest to the highest average combined sales tax rate: Hawaii (4.5%), Wyoming (5.44%), Maine (5.5%), Wisconsin (5.7%), Virginia (5.77%), Kentucky (6%), Maryland (6%), and Michigan (6%).
There are three reliable ways to check sales tax rates across the U.S.:
- Visit the official tax authority for the state where you do business. This is the best source for the latest state and local sales tax rules and rates.
- Compare historical and current rates on the Tax Foundation sales tax database. It provides state-by-state sales tax rates and historical data, making it useful for comparing changes over time.
- Look up a specific state or location on Avalara’s U.S. sales tax rate database. It is a convenient way to check current state sales tax rates and related local rates.
If you sell through a marketplace facilitator such as Amazon, eBay, Etsy, or Walmart Marketplace, the platform handles sales tax collection and remittance on your behalf.
For sellers using their own online store such as WooCommerce, Shopify, Wix, etc, you are responsible for calculating, collecting, filing, and remitting sales tax when required. The key factor is nexus, or your connection to a state.
There are five common types of sales tax nexus:
- Physical Nexus – A physical presence, such as an office, warehouse, inventory, or employees.
- Economic Nexus – Exceeding a state’s sales or transaction threshold.
- Click-Through Nexus – Sales generated through in-state affiliates or referrals.
- Affiliate Nexus – A related business or affiliate has a qualifying presence in the state.
- Marketplace Nexus – Selling through platforms like Amazon, eBay, Etsy, or Walmart that collect and remit sales tax for sellers.
In addition to sales tax, sellers and businesses operating in the U.S. must also pay corporate income tax/personal income tax/excise tax and other taxes depending on your cases.
The calculation and filing process depend on the business structure (LLC, C-Corp, etc.).
Each state will have different tax regulations. Make sure to check them to know all your tax compliance. For example, companies in Delaware need to file annual reports and pay franchise tax instead of corporate tax.
We offer a comprehensive range of accounting and tax services for US companies. Our services include:
- Tax Consulting for LLC companies.
- Monthly/Annual Tax Accounting services in accordance with US GAAP.
- QuickBooks Consulting and Licensing.
- Corporate Income Tax Return Preparation.
- Sales Tax Return Preparation.
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The content in this article is provided by Global Link Asia Consulting for general informational purposes only. It is intended as a helpful reference and should not be considered legal, tax, accounting, banking, or other professional advice. Because laws and regulations can change, and every situation is different, we recommend that individuals and businesses seek independent professional advice before making any important decisions. Global Link Asia Consulting is not responsible for any loss or damage that may result from relying on the information in this article without obtaining appropriate professional advice.
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