A state-level tax charged on the sale of goods or certain services, collected from customers and remitted to the state by the seller.
What is Sales Tax?
Sales tax is a consumption tax imposed by U.S. state and local governments on the sale of goods and some services. It is paid by the customer at the time of purchase, but the responsibility to collect and send it to the government falls on the seller.
Unlike many other countries that have a national VAT (Value Added Tax), the U.S. does not have a federal sales tax. Instead, sales tax is governed at the state and local level, meaning rules and rates vary significantly from one state to another.
For example, in Wyoming, the sales tax rate might be 4% (state base rate), while in Delaware, there’s no sales tax at all. Some cities and counties add local taxes on top of the state base rate—so in some parts of Wyoming, the total sales tax can reach around 6%.
Here’s how it works:
- A customer in a state that charges sales tax buys a product (say, a T-shirt).
- The seller adds the required tax to the purchase price (e.g., $20 shirt + 8% tax = $21.60 total).
- The seller holds the tax and later remits it to the state tax authority, usually on a monthly or quarterly basis.
As a business owner—especially if you’re a non-U.S. founder selling through e-commerce (Shopify, Etsy, Amazon, etc.)—you may need to collect sales tax if you have “nexus” in a state. Nexus means a sufficient connection to the state, which can be created by:
- Having a warehouse, office, or employee there
- Using third-party fulfillment services (like Amazon FBA) with inventory stored in the U.S.
- Making a certain number of sales or reaching a revenue threshold in that state (called economic nexus)
Today, most major e-commerce platforms, such as Amazon, Shopify, Etsy, Walmart, and eBay, automatically collect and remit sales tax on behalf of sellers in many states. This is due to marketplace facilitator laws, which require the platform—not the individual seller—to handle tax collection when a sale is made through their system. For non-U.S. founders, this means that in many cases, you don’t need to register for a sales tax permit or file returns for marketplace sales, since the platform does it for you. However, if you also make direct sales through your own website or other channels, or if you hold inventory in the U.S., you may still have sales tax obligations in certain states and need to register independently. It’s important to understand what the platform covers and where you remain responsible.
If nexus exists, you must register for a Sales Tax Permit in that state, collect tax from customers in that state, and file Sales Tax Returns on a set schedule. Failing to do so can result in fines and penalties.
If you’re buying products to resell, you can often provide a resale certificate to your supplier to avoid paying sales tax on those purchases. This certificate proves that the items are for resale and not for personal or business use. It’s commonly used in e-commerce, dropshipping, and wholesale transactions.
It’s important to note that not all items are taxable—for instance, many states exempt groceries, medicine, or digital products. Also, services are often treated differently from tangible goods.
In summary, sales tax in the U.S. is complex because it’s managed by states, not the federal government. If you sell to U.S. customers, it’s crucial to understand where you have nexus and when you’re required to collect and remit sales tax. Proper registration and compliance are essential to avoid issues with state tax authorities.
