US Sales Tax for Online Sellers: Nexus, Thresholds and Marketplaces

The United States has no national sales tax. Instead, 45 states and the District of Columbia impose their own, and many cities and counties add local rates on top. For anyone selling online — including sellers based in Pakistan who ship to American customers — the real question is not "what is the rate?" but "in which states am I required to collect at all?"

That obligation is called nexus. Traditionally it required a physical presence in a state, such as an office, employee or warehouse. In 2018, the Supreme Court's decision in South Dakota v. Wayfair allowed states to require collection based on sales volume alone. This is economic nexus, and today every state with a sales tax uses it.

Thresholds vary. A common standard is $100,000 of sales into a state in the current or previous calendar year, and some states also count the number of transactions. A few states use higher figures. Because thresholds and measurement periods differ and change over time, always confirm the current rule on each state's revenue department website rather than relying on a summary.

Marketplace facilitator laws make life easier for many small sellers. If you sell through a platform such as Amazon, Etsy, eBay or Walmart Marketplace, the platform is generally responsible for collecting and remitting sales tax on those orders in states with such laws. Sales through your own website, a Shopify store or direct invoices are a different matter — those remain your responsibility once you have nexus.

Once you have nexus in a state, the steps are: register for a sales tax permit with that state, collect the correct rate at checkout, file returns on the schedule the state assigns (monthly, quarterly or annually), and remit what you collected. Many states require a return even for periods with no sales. Collecting tax without registering is not allowed, so register first.

Not everything is taxable everywhere. Groceries, clothing, digital products and services are treated differently from state to state. Software subscriptions, for example, are taxable in some states and exempt in others. Selling to a business that provides a valid resale or exemption certificate is usually exempt, but you must keep the certificate on file.

Practical tools help. Most ecommerce platforms can calculate rates by delivery address, and dedicated sales tax services can track how close you are to each state's threshold. Review your sales by state at least once a quarter.

Sales tax is separate from income tax: having sales tax obligations in a state does not by itself mean you owe that state income tax. Use our invoice generator to produce clear invoices that show tax separately from the price.