Sales tax seems simple until you sell in more than one state or online. Between "nexus," taxable versus exempt items, and dozens of local rates, it is one of the easiest areas to get wrong—and getting it wrong can mean back taxes and penalties.
When does a business have to collect sales tax?
You must collect sales tax when you have "nexus" in a state—a connection significant enough to create a tax obligation. That can come from a physical presence (an office, employees, inventory) or, since recent rulings, from "economic nexus": exceeding a sales or transaction threshold in a state even without a physical presence.
What is economic nexus?
Economic nexus means you can owe sales tax in a state simply by selling enough there—commonly $100,000 in sales or 200 transactions in a year, though thresholds vary by state. It is why online and multi-state sellers often owe tax in states they have never set foot in.
What sales are taxable?
It depends on the state and what you sell. Most tangible goods are taxable; many services and some items (like certain groceries) are exempt. Rates also stack—state, county, and city—so the same product can be taxed differently across town.
We handle sales and use tax registration and filings so you stay compliant everywhere you sell. See our tax & compliance services.