Online sellers may owe sales tax in states where they have a physical presence or exceed sales thresholds. Rules differ by state and change over time.
Nexus
Nexus is a connection to a state that requires you to collect sales tax. It can come from physical presence, such as an office or inventory, or from economic nexus, which is based on sales volume or number of transactions in a state, often around $100,000 or 200 transactions in many states.
Marketplaces
Most states require marketplace facilitators such as large online platforms to collect and remit sales tax on sales through their platform. You may still need to register or file in some states, and you remain responsible for sales made on your own website.
Steps
- Track sales by state.
- Check each state's thresholds.
- Register for a sales tax permit when you meet them.
- Collect tax at the correct rates, which can vary by locality.
- File and remit on time.
- Consider software to automate.
Exemptions
Resale certificates, exempt customers and certain products can be exempt. Keep documentation. Consult a tax professional about your situation.
Frequently asked questions
Do I owe sales tax if I sell only on a marketplace?
The marketplace may collect it, but check your state's rules.
What if I did not collect?
You may owe back taxes. Consider voluntary disclosure programs.