Tax Knowledge

Complete Guide to US Sales Tax

Comprehensive analysis of the U.S. sales tax system, helping cross-border e-commerce teams understand basic concepts, registration requirements, and compliance workflows.

Sarah Chen2024-01-158 min read

Nexus rulesSales taxCross-border e-commerceTax compliance

What is sales tax?

Sales tax is a consumption tax imposed by U.S. state and local governments on sales of goods and certain services. Unlike VAT systems, U.S. sales tax is generally collected at the final retail transaction.

Basic structure

State sales tax is collected by state governments and usually ranges from 0% to 10%.
Five states do not impose statewide sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon.
Local sales tax can include county, city, and special district taxes.
Combined rates can vary substantially by address.

Nexus rules

A seller must generally register and collect sales tax in states where it has nexus. Nexus can be physical, economic, or created by specific activities.

Physical nexus includes offices, warehouses, employees, inventory, or events.
Economic nexus is usually triggered by sales or transaction thresholds.
Many states use $100,000 in sales as a common threshold, but rules vary.

Compliance best practices

Register promptly when nexus is triggered.
Use accurate, address-level tax rate calculation.
File on time according to each state's cadence.
Maintain detailed sales, exemption, and filing records.