Sales Tax is a state-level tax imposed on the sale of goods and certain services within the United States. It is collected by sellers at the point of sale and remitted to the state government. Unlike VAT systems used internationally, U.S. sales tax is applied only at the final point of sale to the end consumer.
Each state sets its own:
- Sales tax rate (ranging from 0% to over 10%)
- Taxable items or services
- Filing frequency (monthly, quarterly, annually)
- Nexus thresholds, which determine if you’re required to collect sales tax in that state
If a business has nexus (physical or economic) in a state, it must:
- Register for a sales tax permit
- Collect tax from customers in that state
- File regular sales tax returns
Why is it important?
Failure to collect and remit sales tax properly can result in penalties, audits, and back taxes owed even for foreign-owned businesses with U.S. customers. States are becoming increasingly aggressive in enforcing compliance, especially for online sellers and SaaS companies.
Who is it for?
Any business selling physical goods or taxable services to customers in the U.S. including non-resident entrepreneurs should evaluate their state sales tax obligations.
