Modern businesses are increasingly global, selling to customers across multiple states and countries. While expanding your reach is a significant milestone, it also introduces complexity—particularly with US sales tax. If your business sells to customers in the US, you are responsible for complying with the sales tax laws of the states where you have tax obligations.

Because tax rules, rates, and thresholds vary by state and product, compliance can become a moving target. This guide defines the foundational concepts you need to understand to manage your US sales tax obligations effectively.

Nexus

Nexus is the legal term for a connection between a business and a taxing jurisdiction that is significant enough for the business to be required to collect and remit sales tax. This can be defined by a physical presence (such as an office or warehouse) or economic activity.

• Physical nexus: This is established when a business has a physical presence in a state, such as a store, office, employee, or inventory stored in a third-party warehouse.
  
• Economic nexus: This involves liability that’s created by reaching a specific level of sales or transactions in a state—even without a physical presence. For example, in Georgia, the threshold is $100,000 in sales or 200 transactions in the previous or current calendar year. However, some states use a higher threshold, such as Texas and California at $500,000.
  

Marketplace facilitator

A marketplace facilitator is a platform—such as Amazon, Etsy, or eBay—that facilitates sales for third-party sellers. Under marketplace facilitator laws, the platform (i.e., the facilitator) is responsible for collecting and remitting sales tax on behalf of its sellers in most states. This structure reduces the compliance burden for individual sellers, though they might still need to register and file zero returns in certain jurisdictions.

Platforms

In the context of software and commerce, platforms are businesses that enable other businesses to accept payments and sell goods or services. Platforms often have unique tax obligations depending on whether they are considered a marketplace facilitator or merely a payment processor. If a platform controls the checkout experience and handles the funds, states often shift the tax collection responsibility to the platform rather than the individual merchant.

Registration

Registration is the act of obtaining a sales tax permit from a state’s taxing authority. You are legally required to register in any state where you have nexus before you begin collecting tax from customers. It’s important to ensure you do not collect tax if you have not yet registered with the applicable jurisdiction.

Taxability

Taxability refers to whether a specific product or service is subject to sales tax under state law. Rules vary significantly depending on the type of product:

• Physical goods: These are generally taxable, though exemptions may exist for essentials such as groceries or clothing.
  
• Digital products: These include ebooks, online courses, and music. Not all states tax these products, and those that do often have varying definitions of what constitutes a digital product.
  
• Software-as-a-service (SaaS): SaaS often has unique regulations. For instance, SaaS is fully taxable for personal use in Connecticut, nontaxable in California, and taxed at 80% of the price in Texas.
  

Sourcing

Sourcing rules determine which tax rate applies to a transaction—specifically, whether the rate is based on where the seller is located or where the customer is located.

• Origin-based sourcing: You charge the sales tax rate for the location where your business is based.
  
• Destination-based sourcing: You charge the sales tax rate for the location where your customer is located or where the item is shipped.
  

Filing and remittance

Filing is the process of submitting a tax return to the state, while remittance is the actual payment of the taxes you collected. While these are two separate functions, they are generally done at the same time.

• Filing frequency: States assign filing schedules—monthly, quarterly, or annually—based on your sales volume or tax liability. Your filing frequency can change if your business begins generating more or less revenue in a state.
  
• Zero returns: You are generally required to file a tax return in all states where you are registered, even if you had no sales or tax liability during that specific period.
  

Tax-inclusive vs. tax-exclusive pricing

How tax is presented to the customer depends on the region and the business model:

• Tax-exclusive pricing: This is the most common model in the US. The advertised price does not include sales tax. Tax is calculated at checkout and added to the subtotal.
  
• Tax-inclusive pricing: This model is more common in Europe and Australia. The advertised price is the final price paid by the customer, with the tax amount already built-in. For US businesses selling internationally, supporting both models is often necessary to meet local expectations and regulations.
  

How Stripe Tax can help

Stripe Tax reduces the complexity of tax compliance so you can focus on growing your business. 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 API.

Stripe Tax helps you monitor your obligations and alerts you when you exceed a sales tax registration threshold based on your Stripe transactions. It can also register to collect tax on your behalf in the US and manage filings through trusted partners. Stripe Tax automatically calculates and collects sales tax, value-added tax (VAT), and goods and services tax (GST) on:

• Digital goods and services in all US states and more than 100 countries
  
• Physical goods in all US states and 42 countries
  

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: If your business is in the US, let Stripe manage your tax registrations, and benefit from a simplified process that prefills application details—saving you time and simplifying compliance with local regulations. If you’re located outside the US, Stripe partners with Taxually to help you register with local tax authorities.

• 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.