The information on this page was current at the time it was published. Regulations, trends, statistics, and other information are constantly changing. While we strive to update our Knowledge Base, we strongly suggest you use these pages as a general guide and be sure to verify any regulations, statistics, guidelines, or other information that are important to your efforts.

Sales Tax In The US

Businesses with a physical storefront

If you run a business in the United States with a physical storefront, collecting sales tax is relatively straightforward. You must charge the sales tax applicable in the place in which your business is located. In general, you must collect state and local taxes from your customers. If you have an online business, sales tax issues are a little more complicated. If you run an online business but have any physical presence in any state, such as a store, an office, a warehouse, or even a sales representative, you are required to collect all applicable state and local taxes from your customers.

Businesses with no physical storefront

Today there is no federal law regulating sales tax for online-only businesses. The federal government has considered legislation, the Marketplace Fairness Act, that would regulate how online sales tax is collected across the country. The Marketplace Fairness Act would allow states to require out-of-state (companies with no in-state physical location) companies to tax customers on online and catalog sales made to customers in their state. Companies that make less than $1 million in annual sales and that do not have an in-state presence would be exempt from the tax requirements under the Marketplace Fairness Act. Under the Act, states would be required to meet certain criteria to simplify their sales tax laws and make collection easier. The Marketplace Fairness Act has not passed, although it has been proposed several time now.

State-based tax legislation for companies without physical storefront - select states

Some states have enacted legislation that requires companies without a physical presence to collect taxes on online purchases. These laws, often called “Amazon laws,” vary by state.

California:

In 2011, California enacted two pieces of legislation, so-called “Amazon laws,” which are aimed at collecting taxes from large internet retailers, such as Amazon. Under the Assembly Bill 155 (AB 155), non-California internet retailers must collect California sales tax if all of the following conditions are met:

• they have an agreement with a person(s) in California to direct potential customers to their website;

• they compensate this person in California for directing potential customers to their website;

• their “total cumulative sales price from directed sales to California customers exceeds $10,000 within the preceding 12 months; and

• their overall total cumulative sales in California (directed or otherwise) exceeds $1,000,000 within the preceding 12 months.

If your business does not satisfy these specific conditions that require the collection of sales tax under AB 155, your sales tax obligations align with the physical-presence rule described above. This legislation has been called a “click-through” arrangement.

Colorado:

Colorado has an economic nexus law. This means out-of-state sellers must collect and remit sales tax even if they lack a physical presence in the state, as long as their annual sales into Colorado exceed $100,000.

Additionally, Colorado has a marketplace facilitator law. This requires online marketplaces like Amazon and eBay to collect and remit sales tax on behalf of third-party sellers using their platforms.

For more information, visit the Colorado Department of Revenue website: Out-of-State Businesses and the Sales and Use Tax.

Florida:

While Florida previously contemplated a "click-through" arrangement tax scheme similar to California, it was never enacted. As of October 26, 2023, Florida follows the physical-presence rule for online sales tax collection. This means out-of-state sellers are only required to collect and remit sales tax if they have a physical presence in the state.

However, the landscape of online sales tax is constantly evolving, and Florida is not exempt from potential changes. It's important for businesses to stay informed about any updates or proposed legislation that could impact their tax obligations.Updates and current legislation can be found through the Florida Department of Revenue - sales and use tax.

Georgia:

The minimum threshold for "cumulative gross receipts" from directed sales to Georgia customers remains at $50,000 in the preceding 12 months.

However, Georgia has implemented additional conditions that may require out-of-state sellers to collect and remit sales tax, even if they do not meet the $50,000 threshold. These conditions include:

• Having inventory stored in Georgia through a fulfillment center or warehouse.

• Regularly delivering goods or services in Georgia through employees, independent contractors, or agents.

• Having employees or independent contractors working in Georgia who solicit sales or take orders for the business.

• Owning or leasing real property in Georgia that's used for business purposes.

Therefore, it's crucial for businesses selling online to Georgia customers to stay informed about the latest changes and regulations. They should carefully review their sales activities and determine if they are required to collect and remit sales tax under Georgia's "Amazon Law" and other relevant regulations.

Illinois:

While the initial "Amazon law" in Illinois was deemed unconstitutional, the state has implemented economic nexus laws requiring out-of-state retailers to collect and remit sales tax on online purchases made by Illinois customers.

Here's the updated information as of 2023:

• Remote retailers exceeding $100,000 in annual sales into Illinois are required to collect and remit sales tax.

• Marketplace facilitators like Amazon and eBay are required to collect and remit sales tax on behalf of third-party sellers using their platforms.

• Illinois also uses a "click-through nexus" approach, where out-of-state retailers with affiliate agreements or marketing campaigns targeting Illinois customers may be required to collect sales tax, even if their sales volume falls below the $100,000 threshold.Find more useful information on Illinois Department of Revenue - Sales Tax Web Filing and Forms & Publications.

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Massachusetts:

Massachusetts’ sales tax law follows the physical-presence rule. Like many other states, Massachusetts’ online sales tax law is in a state of flux, which means you should stay up-to-date on the topic. As of 2023, Massachusetts implements economic nexus, requiring out-of-state retailers with sales exceeding $100,000 in the previous calendar year to collect and remit sales tax on online purchases made by Massachusetts customers.Updates and current legislation can be found through the Massachusetts Department of Revenue.

New York:

On June 21, 2018, the United States Supreme Court ruling in South Dakota v. Wayfair (138 S.Ct. 2080 [2018]) eliminated the prohibition on a state imposing sales tax collection responsibilities on businesses that have no physical presence in that state. Due to this ruling, certain existing provisions in the New York State Tax Law that define a sales tax vendor immediately became effective. Businesses that fall within this definition and make taxable sales in New York State are required to collect and remit New York State and local sales tax, as discussed below.

The term vendor includes a person who regularly or systematically solicits business in New York State by any means and by reason thereof makes taxable sales of tangible personal property to persons in the state. A person is presumed to be regularly or systematically soliciting business in the state if, for the immediately preceding four sales tax quarters:

• the cumulative total of the person's gross receipts from sales of tangible personal property delivered into the state exceeded $500,000, and

• such person made more than 100 sales of tangible personal property delivered in the state.

Therefore, a business that has no physical presence in New York State but meets the requirements outlined above must register as a New York State vendor.Further information and updates can be found through the New York State Department of Taxation and Finance.

North Carolina:

All remote sellers having gross sales in excess of one hundred thousand dollars ($100,000) sourced to North Carolina or two hundred (200) or more separate transactions sourced to North Carolina in the previous or current calendar year (collectively "Threshold") must register to collect and remit sales and use tax to North Carolina effective November 1, 2018. 

Further information and updates can be found through the North Carolina Department of Revenue.

Texas:

Out-of-state retailers without a physical presence in Texas are not required to collect sales tax on online purchases made by Texas customers.Texas has an economic nexus threshold of $500,000 in annual sales to Texas customers. Exceeding this threshold may trigger the obligation to collect and remit sales tax, even without a physical presence.

Marketplaces like Amazon and eBay are responsible for collecting and remitting sales tax on behalf of third-party sellers exceeding $500,000 in annual sales to Texas customers.

More information and updates can be found through the Texas Comptroller of Public Accounts.

Washington:

Washington primarily operates under the physical presence rule. Out-of-state retailers only need to collect and remit sales tax on online purchases made by Washington customers if they have a physical presence in the state. This can include having a store, warehouse, employees, or affiliates within Washington.

Washington also has an economic nexus threshold of $100,000 in annual sales to Washington customers. If an out-of-state retailer exceeds this threshold, it is required to collect and remit sales tax regardless of any physical presence. Similar to other states, online marketplaces like Amazon and eBay are responsible for collecting and remitting sales tax on behalf of third-party sellers exceeding $100,000 in annual sales to Washington customers.

The concept of click-through nexus is still evolving and being challenged in courts. In Washington, there is no clear-cut law on whether out-of-state retailers with affiliate agreements or marketing campaigns targeting Washington customers need to collect sales tax. This area remains subject to ongoing legal interpretation and potential future legislation.More information and updates can be found through the Washington Department of Revenue.