A tariff is a tax levied by a government before foreign goods enter the domestic market. While both tariffs and sales tax are collected by governments and affect the final cost of an imported product, they differ in how, when, and why they apply. For online businesses that source products internationally or sell across borders, confusing the two can lead to margin miscalculations, unexpected import bills, and unrealistic retail prices.

In 2025, new tariffs in the US amounted to an average tax increase of $1,000 per household. Below, we’ll discuss how tariffs and sales tax work, where they intersect, and what businesses need to account for when both apply to the same product.

Key takeaways

• A tariff is an import cost paid at the international border by the importer. A sales tax is collected at checkout and remitted to the state government by the seller.

• An imported product can be subject to both a tariff and a sales tax. These two charges stack and directly affect your pricing and margin models.

• Sales tax obligations at checkout and tariff obligations at the border are managed through separate tools and processes. Conflating the two can result in compliance or cost modeling gaps.

Is a tariff a tax?

In short, yes. A tariff is a type of duty, which is a tax imposed by a government on goods that cross an international border. It’s meant to encourage consumption of domestic products. Tariffs are assessed on the value of specific imported products from specific countries; they tend to change more frequently than duties do, based on international trade negotiations. While the end customer often pays the cost via the product’s price, the importer must pay tariffs before it brings goods to the domestic market.

Many countries also apply a sales tax on imported goods, such as those purchased online from another country. Sales tax is a consumption charge, assessed at the point of sale and collected by the retailer. In the US, retailers collect sales tax and remit it to the relevant state or local government instead of the federal government. The seller acts as a pass-through: the economic burden generally falls on the buyer, but the legal obligation to collect and remit sits with the seller.

A tariff changes what a product costs a business before it’s sold. A sales tax changes what it costs the customer at the moment of purchase.

How do tariffs affect the cost of goods for online businesses?

In the US, three factors determine a product’s applicable tariff: the item’s Harmonized Tariff Schedule (HTS) code, country of origin, and valuation. HTS is the classification system used to categorize imports. When a product is misclassified and gets the wrong rate, corrections after the fact can trigger penalties.

Country of origin matters because the US maintains different tariff schedules for different trading partners. Goods subject to Section 301 tariffs (most notably from China) often carry additional duties on top of the standard rate. A supplier switch from one country to another can change your effective tariff rate substantially, which sometimes makes a higher-cost supplier in a lower-tariff country the better financial option. New Section 301 lists, presidential proclamations under Section 232, or the expiration of duty suspension programs can materially change what you owe on a product you’ve been importing for years.

Goods valued at $800 or less historically entered the US duty-free, but recent policy changes have suspended the practice. This affects direct-to-consumer (DTC) businesses that ship from overseas warehouses.

Ultimately, the sticker price from a supplier isn’t what you pay. Landed cost (product’s price plus freight, insurance, customs duties, and applicable fees) is the real input to your margin model.

How does sales tax work for online sellers?

US sales tax is imposed at the local level by each state (and the District of Columbia). In some states, even counties, cities, and individual municipalities can set their own rates and rules. There’s no federal sales tax, and what’s taxable in one state might be exempt in another.

Nexus

Nexus is the legal connection between a business and a state that mandates sales tax collection. The business establishes physical nexus in a state if it has a warehouse, office, or employee there. After the Supreme Court’s 2018 decision in South Dakota v. Wayfair, states were able to set sales thresholds that, once exceeded, require out-of-state sellers to collect and remit tax. This creates economic nexus. The threshold is often set at $100,000 in taxable sales, although specifics vary by state. An online business that sells nationwide might have nexus in dozens of states and a collection obligation in each of them.

VAT and GST outside the US

Many countries use value-added tax (VAT) or goods and services tax (GST) rather than a sales tax. These are consumption taxes collected at each stage of the supply chain, with businesses able to reclaim the tax paid on inputs. EU VAT, UK VAT, Australian GST, and Canadian GST and Harmonized Sales Tax (HST) all follow this model.

When do tariffs and sales tax both apply to the same transaction?

Imported products are often subject to both tariffs and sales tax. The importer of a product pays a tariff at the border. That tariff increases the landed cost of the goods. When the business sells that product to a customer in a state where it has nexus, it collects sales tax on the sale price, which already reflects the tariff-inflated cost.

This stacking effect matters most in a few specific scenarios:

• High-tariff goods with thin retail margins: If you’re selling a product that carries a 25% Section 301 tariff, your cost structure absorbs the duty before you set a retail price. Sales tax (8%–10% in states such as California, Illinois, and Tennessee) then applies on top of the product’s price, which would’ve been raised to protect margin.

• Marketplace sellers: If you sell through a marketplace with facilitator laws in effect (these cover most US states), the platform collects and remits sales tax on your behalf. Tariffs are still your problem upstream; the marketplace has no visibility into your import costs.

• DTC brands that import finished goods: If you manufacture abroad and sell to the end customer in the US, you’re both the importer and seller. You pay the tariff, absorb or pass it on in pricing, and then collect sales tax at checkout. You’re responsible for both obligations.

How does tariff exposure change your pricing and margin strategy?

Tariffs force businesses to decide how to handle the additional cost. Here are the three options:

Absorb the tariff

The business pays the additional cost, which protects the retail price but decreases margin. This is defensible when competitive pressure makes a price increase untenable and when the tariff is expected to be temporary or narrow, but it doesn’t work indefinitely.

Pass it through

You can raise the retail price to maintain margin. The customer pays more, and depending on your product category and competitive set, you might see demand fall. Businesses with differentiated products or strong brand loyalty have more leeway here than commodity sellers.

Restructure sourcing

Move production or sourcing to a lower-tariff country. This is the most durable solution but also the most time-consuming. Supplier qualification, quality assurance, logistics setup, compliance, and lead time adjustments can take months or years.

You shouldn’t let the pricing decision happen by default. Model your landed costs with tariffs included before you set retail prices and rebuild that model whenever trade policy shifts materially. Sales tax is calculated on the selling price, regardless of how much of that price represents tariff pass-through.

What do online businesses need to know about managing tariffs and sales tax together?

Tariffs and sales tax will have different owners in most organizations. The supply chain, logistics, or finance team typically manages tariffs, while accounting or tax handles sales tax compliance. In small businesses that lack functional separation, the same person might be responsible for both obligations. Whatever the structure, it’s important that tariffs and sales tax are properly managed.

Tools like Stripe Tax can help with the sales tax side. Stripe Tax calculates sales tax, VAT, and GST at checkout automatically, using the transaction’s origin and destination to apply the right rate in the right jurisdiction. As your nexus footprint expands, Stripe Tax updates its calculations to reflect current rates and rules without requiring manual maintenance. It also generates the documentation needed to support filing and remittance.

These kinds of tools don’t handle tariffs so you’ll need to manage them separately. Your customs broker, freight forwarder, or trade compliance software manages the import side (e.g., HTS classification, duty calculation, entry filing). Stripe Tax handles the point-of-sale side. The integration point between them is your pricing model: landed costs (including tariffs) go in one end, and retail prices (on which Stripe Tax calculates obligations) come out the other.

How Stripe Tax can help

Stripe Tax reduces the complexity of tax compliance so you can focus on growing your business. Stripe Tax helps you monitor your obligations and alerts you when you exceed a sales tax registration threshold based on your Stripe transactions. In addition, it automatically calculates and collects sales tax, VAT, and GST on both physical and digital goods and services—in all US states and in more than 100 countries.

Start collecting taxes globally by adding a single line of code to your existing integration, clicking a button in the Dashboard, or using our powerful application programming interface (API).

Stripe Tax can help you:

• Understand where to register and collect taxes: See where you need to collect taxes based on your Stripe transactions. After you register, switch on tax collection in a new state or country in seconds. You can start collecting taxes by adding one line of code to your existing Stripe integration or add tax collection with the click of a button in the Stripe Dashboard.

• Register to pay tax: Let Stripe manage your global tax registrations and benefit from a simplified process that prefills application details—saving you time and simplifying compliance with local regulations.

• Automatically collect tax: Stripe Tax calculates and collects the right amount of tax owed, no matter what or where you sell. It supports hundreds of products and services and is up-to-date on tax rules and rate changes.

• Simplify filing: Stripe Tax seamlessly integrates with filing partners, so your global filings are accurate and timely. Let our partners manage your filings so you can focus on growing your business.

Learn more about Stripe Tax, or get started today.