Ecommerce Sales Tax: Everything You Need to Know When Selling Online

ecommerce sales tax

Until a few years ago, you only had to pay sales tax on products in the state where your business was physically located.

In other words, if you were a Delaware-based ecommerce business that shipped products to Arizona, you didn’t owe Arizona any sales tax—even though Arizona charges it.

A 2018 Supreme Court ruling changed the rules, and now ecommerce businesses need to collect and file taxes in states they ship to, not just the ones they’re based in.

If your ecommerce business sells to customers across the United States, this guide covers everything you need to know aboutecommerce sales tax, including foundations, best practices, and basic criteria for all 50 states (plus Washington, DC).

This is your introduction to becoming and remaining tax compliant as your online business grows.

Table of Contents

What is ecommerce sales tax?

Ecommerce sales tax is the tax you charge and collect from your online customers. It’s a percentage of the price of the items you sell, and works similarly to the tax you’d charge your customer in a physical store.

It’s also called “online sales tax” or “internet sales tax,” but it’s not a special tax reserved for sales that take place online. We call it ecommerce sales tax because tax laws have been updated to include online shopping scenarios.

This update happened thanks to the 2018South Dakota v. Wayfair, Inc. case, which ruled a state may require sellers with no physical presence in the state to collect and remit sales tax for goods sold to customers in that state.

That’s where nexus and economic nexus come in.

Nexus is a connection or presence in a state that requires you to track and pay sales tax. Nexus can be established by having a physical presence in the state (a store or a warehouse) or having employees there. This can be different from state to state.

Economic nexus means if you make a certain amount of sales in a state, you may be required to collect and remit sales tax, even without a physical presence. Find the list of economic nexus laws for each of the 50 states below.

Importance of ecommerce sales tax

Taxes are annoying on a good day and stressful on a bad day, which is why it is important to keep track of what you owe and to whom. You owe it to yourself, your business, and the state to keep track of your tax obligations. Here are some of the main reasons why.

Missing sales tax requirements can have serious consequences

随着业务的增长,你需要有一个销售tax permit for every state you’re selling into. You’ll also have tofile sales tax returns, and pay any sales tax you owe.

Miss these steps, and you’ll have to pay past-due sales tax, penalties, and interest that can range from hundreds up to tens of thousands of dollars. In some states, failure to file or pay sales tax can have criminal penalties.

Correct sales tax is good for customer relationships

When you have all your sales taxes organized, you cancharge the correct sales taxamount instantly at checkout. If that’s not the case, you may have to ask your customers for additional payments, which can frustrate the customer and put their trust in you at risk. This makes it harder to retain customers and build up your brand’s reputation. Upfront transparency and a clear tax situation are key.

Sales tax is essential for economic growth

States, counties, and local municipalities use sales tax to raise revenue. The funds are used to develop communities, build roads, improve schools, parks, and libraries, and fund protective services like fire departments.

Sales tax plays an important role in society throughout the United States, and ecommerce businesses make significant contributions to it.

6 ecommerce sales tax best practices

States with economic nexus can be a risk for fast-growing companies. As your online store grows more popular, you’re more likely to get audited, so if you haven’t yet—prioritizesales tax compliance.

Here are some tips and best practices to help you do it well:

1. Determine where you have sales tax nexus and how it works

Use the list below to figure out what prompts economic nexus for you in each of the 50 states.

Keep in mind that sales can be taxed in two different ways, known as sourcing:

  • Origin-sourced sales are taxed where the seller is located
  • Destination-sourced sales are taxed where the buyer takes possession of the item sold

Origin-based sourcing is easier to track because it only applies to the sales tax rates for states you’re based in. Destination-based sourcing is more common, which makes ecommerce sales tax trickier.

2. Register for a sales tax permit

Once you know what states you havesales taxnexus in, the next step is to register with that state’s tax authority and obtain a sales tax permit or a seller’s permit. Costs of applying for these permits vary from free to $100.

Almost all states allow you to register for your permit online.

Sales tax and seller’s permits have varying expiration dates. Permits inArkansasremain active until you request cancellation, while you have to renew your permit inColoradoevery two years.

3. Know your sales tax exemptions

There are items, scenarios, and periods that are exempt from sales tax. As you learn the states where you meet nexus criteria, check each of them for exemptions. Here’s a list to get you started:

  • Nonprofit exemptions:Some states allow nonprofit organizations to purchase items free from sales tax if they meet certain criteria and have relevant certificates (see example forVirginia).
  • Wholesale and reseller exemptions:Some states provide an exemption when the purchaser isn’t the final consumer, for example a distributor (see example forColorado).
  • Sales tax holidays:Some states have periods when state sales tax is suspended on certain items, like school supplies and clothing during a back-to-school season (see example forNew Mexico).
  • Product exemptions:Many states don’t collect tax, or collect lower taxes, on essential product categories like groceries (see example forNew York).

4. Collect, report, and file your sales tax returns

With your permits and an online store set up to collect sales tax for each state, you’ll need to report and file your sales tax returns. Reporting requirements vary widely according to the state you’re remitting it to. Frequency of reporting depends on your sales volume.

For example, you’d file quarterly if your monthly tax liability is consistently below $100, and you’d file monthly if your monthly liability was between $100 and $20,000 in the state ofNorth Carolina. Enterprise-sized merchants can expect to report and file taxes at least quarterly, and often monthly.

If you didn’t collect sales tax within a particular state in a filing period, you still submit a file. Even if the total is zero, not doing so can result in late or non-filing penalties.

5. Create a visible schedule for sales tax returns

Each state defines the frequency at which you need to report and file your sales tax returns, and the day of the month you need to file by.

In the state ofMissourimonthly returns are due on the last day of the month, quarterly returns on the last day of the month after the end of the quarter, and annual returns on January 31.

Keep an updated tax year calendar for all states where you need to collect, report, and file taxes to ensure you never miss a due date.

6. Consider automating sales tax bookkeeping and payments

Many companies start by complying with sales tax laws manually, using Department of Revenue notices for one or two states where they know they are required to file.

This method doesn’t scale. What took just a few hours a month with one state could take dozens of hours once your business grows and becomes present across the country, where there are more than 12,000 tax jurisdictions.

Whether or not you’re ready for it, growth will trigger tax responsibilities, liability, and risks. You can avoid this by usingdedicated softwareto automate the process of tracking, collecting, reporting, and filing your taxes across the United States.

Shopify merchants can useAvalarato determine economic nexus, register where they need to, and file returns—and rest assured their tax responsibilities are taken care of.

State-by-state economic nexus laws

Here you’ll find the economic nexus thresholds for each of the 50 states, plus Washington, D.C.

If you don’t have a physical presence in these states, but sell to customers based there, and want to know what triggerssales taxresponsibilities, this is the information you need.

States typically refer to ecommerce businesses as remote sellers, out-of-state sellers, out of state businesses, or companies doing remote sales.

Note there are types of products and services exempt from sales tax, which differ from state to state, so be sure to check if these apply to your business.

There might be additional legislation in place on top of the economic nexus, so check the links for each state’s tax and revenue resources to make sure you’re aware of them all.

Alabama

Alabama’s economic nexus threshold is $250,000 in sales in the previous calendar year. It’s a destination-sourced state.

Alabama doesn’t tax shipping if you use a common carrier, and if shipping is broken out as a separate line item on the invoice.

For more details and information, viewAlabama's economic nexus guidanceandAlabama's tax resources.

Alaska

Alaska doesn’t have a statewide sales tax, but it’s a home rule state, meaning local governments like cities or counties can define tax terms and audit businesses.

这意味着每一个106年地方政府可能charge a destination-based rate if the merchant has nexus in the state. It’s best to contact local governments directly to determine your sales tax obligations.

Alaska’s economic nexus threshold is $100,000 in sales or 200 transactions in the current or previous calendar year.

Alaska doesn’t tax shipping if shipping is broken out as a separate line item on the invoice.

For more details and information, viewAlaska’s economic nexus guidanceandAlaska's tax resources.

Arizona

Arizona’s economic nexus threshold is:

  • $100,000 in sales in the current or previous calendar
  • $150,000 for 2020
  • $200,000 for 2019

It is an origin-sourced state and considers remote sellers to be any person or business selling or shipping products into Arizona without a physical presence in the state.

Arizona generally doesn’t tax shipping if shipping is broken out as a separate line item on the invoice.

For more details and information, viewArizona’s economic nexus guidanceandArizona’s tax resources.

Arkansas

Remote sellers have an economic nexus threshold of $100,000 in sales or 200 transactions to Arkansas customers in the current or previous calendar year. It’s a destination-sourced state and taxes shipping.

It considers remote sellers to be any out-of-state seller that has no physical presence in Arkansas.

For more details and information, view阿肯色州的经济联系指导andArkansas’s tax resources.

California

California is a mixed-sourced state because city, county, and state sales taxes are origin based, and district sales taxes are destination-based.

The economic nexus threshold is $500,000 in sales in the current or previous calendar year.

California taxes shipping if you combine shipping and handling in a line item or you mark-up the cost of shipping. It doesn’t tax shipping if you pass the cost of shipping on to the customer and charge it as a separate line.

It is important to note that California considers retailers to have a physical presence in the state if they:

  • Maintain inventory or office locations in California
  • Have representatives in California for purposes of taking orders, making sales or deliveries, or installing or assembling personal property
  • Lease equipment, including a computer server, in California

For more details and information, viewCalifornia’s economic nexus guidanceandCalifornia’s tax resources.

Colorado

科罗拉多的经济联系阈值是100000美元sales in the current or previous calendar year. It’s a destination-sourced state.

Colorado generally taxes shipping. The exception is when shipping is a separate line item on the invoiceandthe customer has the option to pick up the item on their own or arrange shipping. When the transaction is exempt from sales tax, so is shipping.

For more details and information, viewColorado’s economic nexus guidanceandColorado’s tax resources.

Connecticut

Connecticut’s economic nexus threshold is $100,000 in sales and 200 transactions in the 12-month period ending on September 30. It’s a destination-sourced state.

Connecticut taxes shipping as long as the items you are shipping are also taxable.

For more details and information, viewConnecticut’s economic nexus guidanceandConnecticut’s tax resources.

Delaware

Delaware does not have sales tax.

Florida

Florida’s economic nexus threshold is $100,000 in sales in the current or previous calendar year. It’s a destination-sourced state.

Even if you don’t meet the economic nexus, Florida considers a seller to have sales tax obligations if they own, rent, or lease tangible personal property in the state.

Florida generally taxes shipping, whether separately stated on the invoice or included in the item price. The exception is when shipping is a separate line itemandthe customer has the option to pick up the item on their own or arrange shipping on their own.

For more details and information, viewFlorida’s economic nexus guidanceandFlorida’s tax resources.

Georgia

For remote sellers, Georgia’s economic nexus threshold is $100,000 in sales or 200 transactions in the current or previous year. It’s a destination-sourced state.

Georgia generally taxes shipping, except when the sale is exempt from sales tax.

For more details and information, viewGeorgia’s economic nexus guidanceandGeorgia’s tax resources.

Hawaii

Hawaii doesn’t have sales tax, but ageneral excise tax(GET) it applies to all business activities.

Hawaii’s economic nexus threshold is $100,000 in sales or 200 transactions in the current or previous year. It’s a destination-sourced state.

夏威夷税收航运,因为它适用于所有business.

For more details and information, viewHawaii’s economic nexus guidanceandHawaii’s tax resources.

Idaho

Idaho is a destination-sourced state with an economic nexus threshold of $100,000 in sales in the current or previous calendar year for remote sellers.

Idaho taxes shipping.

For more details and information, viewIdaho’s economic nexus guidanceandIdaho’s tax resources.

Illinois

For remote sellers, Illinois’s economic nexus threshold is $100,000 in sales or 200 transactions in the preceding 12-month period. It’s an origin-sourced state if you’re an in-state seller, but a destination-sourced state if you don’t have an Illinois location (e.g., warehouse, fulfillment center) to send your orders from.

Illinois generally taxes shipping. The exception is when shipping is a separate line item on the invoiceandthe customer has the option to pick up the item on their own or arrange shipping. When all products in a shipment are exempt from sales tax, so is shipping of that order.

For more details and information, viewIllinois’s economic nexus guidanceandIllinois’s tax resources.

Indiana

Indiana’s economic nexus threshold is $100,000 in sales or 200 transactions in the current or previous calendar year. It’s a destination-sourced state.

Indiana taxes shipping if the company uses private, third-party delivery services. Indiana doesn’t tax shipping when using the United States Postal Service because postage charges through USPS aren’t subject to tax.

For more details and information, viewIndiana’s economic nexus guidanceandIndiana’s tax resources.

Iowa

Iowa is a destination-sourced state with an economic nexus threshold of $100,000 in sales in the current or previous calendar year for remote sellers.

Iowa doesn’t tax shipping if shipping is broken out as a separate line item on the invoice.

For more details and information, viewIowa’s economic nexus guidanceandIowa’s tax resources.

Kansas

Kansas’s economic nexus threshold is $100,000 in sales in the current or previous calendar year. It’s a destination-sourced state and taxes shipping.

Kansas considers a seller to have sales tax nexus if they are based in the state, but also if they sell at a craft show, trade show, or special event there.

For more details and information, viewKansas’s economic nexus guidanceandKansas’s tax resources.

Kentucky

Kentucky is a destination-sourced state that has an economic nexus threshold of $100,000 in sales or 200 transactions in the current or previous calendar year.

Kentucky taxes shipping, except for when the product or service is exempt from sales tax.

For more details and information, viewKentucky’s economic nexus guidanceandKentucky’s tax resources.

Louisiana

Like many states, Louisiana’s economic nexus threshold is $100,000 in sales in the current or previous calendar year. Louisianahas removedthe 200 transactions criteria, as of August 1, 2023. It’s a destination-sourced state that taxes shipping.

Exceptions may apply to separately contracted shipping (for example, customers pick up their order themselves or arrange a third-party delivery. Louisiana is a home rule state, so additional rules may apply depending on the regional taxes applied.

For more details and information, viewLouisiana’s economic nexus guidanceandLouisiana’s tax resources.

Maine

Maine’s economic nexus threshold is $100,000 in sales in the current or previous calendar year. It’s a destination-sourced state.

Maine generally doesn’t tax shipping when shipping is broken out into a separate line item on the invoice, and made by a common or contract carrier or the US mail.

For more details and information, viewMaine’s economic nexus guidanceandMaine’s tax resources.

Maryland

Maryland’s economic nexus threshold is similar to many states, set at $100,000 in sales or 200 transactions in the current or previous calendar year. It’s a destination-sourced state and doesn’t tax shipping if it is broken out as a separate line item on the invoice.

For more details and information, viewMaryland’s economic nexus guidanceandMaryland’s tax resources.

Massachusetts

Massachusetts is also a destination-sourced state with an economic nexus threshold of $100,000 in sales in the current or previous calendar year. Massachusetts generally doesn’t tax shipping if it is broken out as a separate line item on the invoice, the cost is reasonable, and the delivery occurs after the purchase takes place.

For more details and information, viewMassachusetts’s economic nexus guidanceandMassachusetts’s tax resources.

Michigan

The economic nexus threshold for Michigan is $100,000 in sales or 200 transactions made by a remote seller in the previous calendar year. It’s a destination-sourced state.

It’s also a member state of theStreamlined Sales Tax Registration System, which allows businesses to register for a sales tax permit with multiple states at once.

Michigan doesn’t tax shipping if shipping is broken out as a separate line item on the invoice, and the seller keeps records that show how the tax levied was calculated for these transactions. This rulewent into effecton April 26, 2023.

For more details and information, viewMichigan’s economic nexus guidanceandMichigan’s tax resources.

Minnesota

Minnesota’s economic nexus threshold is $100,000 in sales or 200 transactions in the preceding 12-month period. This doesn’t include sales where the customer is buying an item for resale.

Minnesota is a destination-sourced state that taxes shipping, except for when the sale is exempt from sales tax.

For more details and information, viewMinnesota’s economic nexus guidanceandMinnesota’s tax resources.

Mississippi

Compared to most states, the threshold for economic nexus is much higher in Mississippi. Remote sellers are required to remit sales tax when they have $250,000 in sales in the preceding 12-month period. It’s an origin-sourced state.

密西西比州税收航运,除了当sale is exempt from sales tax.

For more details and information, viewMississippi’s economic nexus guidanceandMississippi’s tax resources.

Missouri

Missouri’s economic nexus threshold is the standard $100,000 in sales in the preceding 12-month period, but is determined at the end of each quarter. It’s an origin-sourced state.

Missouri doesn’t tax shipping if shipping is broken out as a separate line item on the invoice.

For more details and information, viewMissouri’s economic nexus guidanceandMissouri’s tax resources.

Montana

Montana does not have sales tax.

Nebraska

Nebraska is a destination-sourced state, with an economic nexus threshold of $100,000 in sales or 200 transactions in the current or previous calendar year. The state taxes shipping whenever the item purchased is taxable and the charges are paid to the retailer. Exceptions are separately stated charges for US postage on direct mail.

For more details and information, viewNebraska’s economic nexus guidanceandNebraska's tax resources.

Nevada

Nevada’s economic nexus threshold is $100,000 in sales or 200 transactions in the current or previous calendar year. It’s a destination-sourced state.

Nevada doesn’t tax shipping if it is broken out as a separate line item on an invoice and it only includes transportation, shipping, or postage. It taxes shipping when shipping charges include handling, crating, preparing for mailing or delivery, and packaging.

For more details and information, viewNevada’s economic nexus guidanceandNevada’s tax resources.

New Hampshire

New Hampshire does not have sales tax.

New Jersey

Like many neighboring states,New Jersey’s economic nexus threshold is $100,000 in sales or 200 transactions in the current or previous calendar year. It’s a destination-sourced state that taxes shipping, except for when the transaction is exempt from sales tax.

For more details and information, viewNew Jersey’s economic nexus guidanceandNew Jersey’s tax resources.

New Mexico

New Mexico doesn’t have sales tax, but a gross receipts tax with an economic nexus threshold of $100,000 in sales of products or services in the previous calendar year. It’s an origin-sourced state that doesn’t tax shipping.

For more details and information, viewNew Mexico’s economic nexus guidanceandNew Mexico’s tax resources.

New York

New York has one of the highest economic nexus thresholds for remote retailers. It is set at $500,000 in salesandat least 100 transactions delivered to the state in the past four quarters.

New York taxes shipping, except for when the product is exempt from sales tax. It’s a destination-sourced state.

For more details and information, viewNew York’s economic nexus guidanceandNew York’s tax resources.

North Carolina

North Carolina is a destination-sourced state, with an economic nexus threshold of $100,000 in sales or 200 transactions in the current or previous calendar year.

North Carolina taxes shipping, except for when the item is exempt from sales tax.

For more details and information, viewNorth Carolina’s economic nexus guidanceandNorth Carolina’s tax resources.

North Dakota

Like most states, North Dakota is a destination-sourced state. It has an economic nexus threshold of $100,000 in sales in the current or previous calendar year, with no minimum number of transactions.

North Dakota taxes shipping, except for when the product is exempt from sales tax.

For more details and information, viewNorth Dakota’s economic nexus guidanceandNorth Dakota’s tax resources.

Ohio

Ohio is an origin-sourced state with an economic nexus threshold of $100,000 in sales or 200 transactions in the current or previous calendar year.

Like Michigan, it is also part of the Streamlined Sales Tax Registration System, which allows businesses to sign up for sales use and tax permits from multiple states at once.

Ohio charges tax on shipping, except for when the product is exempt from sales tax.

For more details and information, viewOhio’s economic nexus guidanceandOhio’s tax resources.

Oklahoma

The economic nexus threshold for Oklahoma is $100,000 in sales in the past 12-month period. It’s a destination-sourced state, where you won’t be charged sales tax on shipping if it is broken out as a separate line item on the invoice.

For more details and information, viewOklahoma’s economic nexus guidanceandOklahoma’s tax resources.

Oregon

Oregon does not have sales tax.

Pennsylvania

Pennsylvania is an origin-sourced state, with a tax economic nexus threshold of $100,000 in annual sales for remote sellers.

Like many states, it requires taxes on shipping fees, except for when the product sold is exempt from sales tax.

For more details and information, viewPennsylvania’s economic nexus guidanceandPennsylvania’s tax resources.

Rhode Island

Remote sellers to Rhode Island will hit the economic nexus threshold at $100,000 in sales or 200 transactions in the previous calendar year. The destination-sourced state taxes shipping on all items, except those that are exempt from sales tax.

Even if you don’t meet the economic nexus threshold, remote sellers should knowonlinereferralscan also trigger the sales tax nexus in Rhode Island.

For more details and information, viewRhode Island’s economic nexus guidanceandRhode Island’s tax resources.

South Carolina

South Carolina is a destination-sourced state, where the economic nexus threshold for remote sellers is $100,000 in sales in the previous or current calendar year. South Carolina taxes shipping, except for when the item is exempt from sales tax.

For more details and information, viewSouth Carolina’s economic nexus guidanceandSouth Carolina’s tax resources.

South Dakota

南达科塔州的经济联系阈值100美元,000 in sales in the previous or current calendar year. It’s a destination-sourced state that taxes shipping, except for when the sale is exempt from sales tax.

For more details and information, viewSouth Dakota’s economic nexus guidanceandSouth Dakota’s tax resources.

Tennessee

Tennessee’s economic nexus threshold is $100,000 in sales in the preceding 12-month period. It’s an origin-sourced state.

Tennessee generally taxes shipping, except for when the sale is exempt from sales tax.

For more details and up-to-date information, viewTennessee’s economic nexus guidanceandTennessee’s tax resources.

Texas

Like New York, Texas’s economic nexus threshold is set at $500,000 in sales in the preceding 12-month period. It’s an origin-sourced state with local tax regions as well.

With so many local tax regions throughout the state, sellers have the option of using the single local tax rate to help streamline collection and remittance. Texas taxes shipping, except for when the product is exempt from sales tax.

For more details and information, viewTexas’s economic nexus guidanceandTexas’s tax resources.

Utah

Remote sellers will hit the economic nexus threshold in Utah after $100,000 in sales or 200 transactions in the current or previous calendar year.

It’s an origin-sourced state, that doesn’t tax shipping as long as it is broken out as a separate line item on the invoice.

For more details and information, viewUtah’s economic nexus guidanceandUtah’s tax resources.

Vermont

Vermont’s economic nexus threshold is $100,000 in sales or 200 transactions in the preceding 12-month period. It’s a destination-sourced state.

Vermont taxes shipping, except for when the sale is exempt from sales tax. If the items sold by your business are exempt from sales tax in Vermont, you don’t need to register a sales tax account with the state, no matter how much you sell.

For more details and information, viewVermont’s economic nexus guidanceandVermont’s tax resources.

Virginia

Virginia’s economic nexus threshold is $100,000 in annual sales or 200 transactions. It’s an origin-sourced state.

Virginia generally doesn’t tax shipping if shipping is broken out as a separate line item on the invoice. Handling and shipping charges are taxed if they aren’t separately stated on the invoice, or are combined with other fees.

For more details and information, viewVirginia’s economic nexus guidanceandVirginia’s tax resources.

Washington

Washington’s economic nexus threshold is $100,000 in sales in the current or previous calendar year. It’s a destination-sourced state, and remote sellers can apply for a business license through the Streamlined Sales Tax Registration System.

Washington taxes shipping, except for when the item is exempt from sales tax, like food, food ingredients and prescription drugs.

For more details and information, viewWashington’s economic nexus guidanceandWashington’s tax resources.

Washington, DC

Washington, DC’s economic nexus threshold is $100,000 in sales or 200 transactions in the current or previous calendar year. That threshold includes sales made on the remote seller’s website and those made through a marketplace.

华盛顿特区,航运和handl一般税ing if included as a single item, but separately stated shipping or delivery charges are generally exempt.

For more details and information, viewWashington, D.C.’s economic nexus guidanceandWashington, D.C.’s tax resources.

West Virginia

West Virginia’s economic nexus threshold is $100,000 in annual sales or 200 transactions. Remote sellers who don’t meet this amount are still required to have a business license in the state. West Virginia is a destination-sourced state, with local sales taxes in many regions

The state taxes shipping, except for when the sale is exempt from sales tax.

For more details and information, viewWest Virginia’s economic nexus guidanceandWest Virginia’s tax resources.

Wisconsin

Wisconsin’s economic nexus threshold is $100,000 in annual sales for remote sellers.

There’s no sales tax on shipping items that are exempt, but shipping on all other items is taxable.

For more details and information, viewWisconsin’s economic nexus guidanceandWisconsin’s tax resources.

Wyoming

The economic nexus threshold in Wyoming is $100,000 in sales or 200 transactions in the current or previous calendar year. It’s a destination-sourced state that requires remote sellers to apply for a business license in order to sell to customers there. The license never expires, so you can continue selling as long as you are in business

Wyoming doesn’t tax shipping if shipping is broken out as a separate line item on the invoice.

For more details and information, viewWyoming’s economic nexus guidanceandWyoming's tax resources.

Ecommerce sales tax FAQ

Who has the highest sales tax?

California has the highest sales tax rate, at 7.25%. It’s followed closely by Indiana, Mississippi, Rhode Island, and Tennessee, which have a sales tax rate of 7%.

Who needs to pay US sales tax?

In the United States, sales tax is triggered when a customer makes a retail purchase. Customers are responsible for paying US sales tax, but sellers are responsible to collect and file correct taxes to the relevant state or local jurisdiction.

How do I set up sales tax for ecommerce?

To set up your ecommerce sales tax, you need to:

  1. Determine the states where you meet nexus criteria, and how sales tax works in those states
  2. Register for a sales tax permit or a seller’s permit in relevant states
  3. Set up a system to calculate and collect taxes on the right transactions in your online store
  4. Report and file taxes based on a schedule determined by each state based on criteria like your sales volume

How does online shopping calculate sales tax?

States can use destination-based or origin-based sourcing for tax collection. Destination-based means sales are taxed based on the rate of the buyer’s location, and origin-based means sales are taxed based on where the seller is located.

The majority of states use destination-based sourcing.

About the author

Marijana Kay

Marijana Kay is a freelance writer for leading B2B SaaS brands in the marketing, analytics, sales, and ecommerce space. She's the founder ofFreelance Bold, a library of resources for freelance writers.