Becoming sales tax compliant is a multistep process. First, you'll have to determine where you have tax obligations. Then, you'll register to collect tax in those states, collect sales tax from customers, and finally report and file tax returns with the appropriate state tax authorities.

Below, we'll explain the steps to compliance, including how to report US sales tax and file returns.

What's in this article?

• Understanding your US sales tax obligations
  
• How to register to collect US sales tax
  
• Collecting US sales tax from your customers
  
• How to report and file US sales tax
  
• How Stripe Tax can help
  

Understanding your US sales tax obligations

States require out-of-state and foreign businesses to collect sales tax once they exceed certain economic nexus thresholds, which can be based on sales revenue, transaction volume, or both.

Businesses can also trigger sales tax obligations through physical nexus – a physical presence in a state. Common activities that create physical nexus include the following:

• Location: An office, warehouse, store, or other physical place of business. Storing inventory often creates physical nexus.

• Employees: Employing staff, a contractor, a salesperson, or an installer who works in the state.

• Events: Selling products at a trade show or other event.

Exceeding a nexus threshold doesn't always mean you must collect sales tax. Not all goods and services are taxable. If what you sell is exempt from sales tax, you don't need to collect tax on it. You might still need to register, though. Work with a sales tax professional to confirm whether you need to register in this case.

How to register to collect US sales tax

Here's a step-by-step guide to registering to collect sales tax in the US:

• Determine where you need to register: Identify the states where your business has a sales tax obligation. This obligation can arise from physical presence, economic nexus, or other state-specific requirements.

• Apply for a sales tax permit: Register for a sales tax permit with the tax authority in each state where you have nexus before you collect sales tax from customers. Most states require businesses to obtain a sales tax permit before they make taxable sales.

• Simplify the registration process: If you'll need to register in multiple states, consider tools that can simplify the process. Stripe Tax can manage US sales tax registrations by prefilling application details, helping reduce administrative work and support compliance with state requirements.

What is the Streamlined Sales and Use Tax Agreement (SSUTA)?

The SSUTA is a cooperative agreement among participating US states designed to simplify sales and use tax compliance for multistate businesses. This means you can register to collect sales tax in all of these states with a single application.

Currently, 24 states have passed legislation to conform to the SSUTA:

• Arkansas
  
• Georgia
  
• Indiana
  
• Iowa
  
• Kansas
  
• Kentucky
  
• Michigan
  
• Minnesota
  
• Nebraska
  
• Nevada
  
• New Jersey
  
• North Carolina
  
• North Dakota
  
• Ohio
  
• Oklahoma
  
• Rhode Island
  
• South Dakota
  
• Tennessee
  
• Utah
  
• Vermont
  
• Washington
  
• West Virginia
  
• Wisconsin
  
• Wyoming
  

Businesses can register via the Streamlined Sales Tax Registration System (SSTRS). Afterward, they'll need to set up accounts individually with each state and separately register if they have sales tax obligations in any nonmember state.

Which US states have no sales tax?

While most jurisdictions require businesses to collect and remit tax on retail transactions, five states don't levy a general statewide sales tax:

• Alaska

• Delaware

• Montana

• New Hampshire

• Oregon

However, selling into these states doesn't always eliminate tax compliance responsibilities. Local jurisdictions and alternative business taxes might still apply. If your sales activity will be limited strictly to states without a statewide sales tax, you generally won't need to register for a state sales tax permit or submit returns – with the notable exception of participating local jurisdictions in Alaska.

Collecting US sales tax from your customers

Once you register, you'll be able to begin charging and collecting sales tax from your customers. Sales tax rates vary across the US, and not all products and services are considered taxable. Most states have a statewide sales tax rate, and many have additional local sales tax rates at the county, municipal, and district levels. Determining the correct sales tax rate for a particular state would mean adding the statewide sales tax rate plus any local sales tax rates.

How to report and file US sales tax

After you collect sales tax from your customers, you'll file a sales tax return and remit the sales tax you collected to the correct state or local tax authority. Here's the process for reporting and filing US sales tax:

• Know your filing frequency: When you register for a sales tax permit, the state assigns your filing frequency – monthly, quarterly, or annually – based on your tax liability. Larger businesses typically file monthly; smaller ones often file quarterly or annually.

• Check your due date: Each tax authority's website lists its filing deadline, and due dates vary by state. File on time to avoid penalties and interest.

• File your return with the correct state or local authority: Learn how to report, file, and remit sales tax in each state.

• File a zero return if you didn't collect tax. You'll still need to file a "zero return," even if you collected no sales tax during the reporting period. You won't remit anything, but you still must file.

• Remit the tax you collected by your due date. Filing and remitting are separate steps. Pay what you collected to the state or local authority on schedule.

Learn how to evaluate tax automation software.

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 application programming interface (API).

Stripe Tax helps you monitor your obligations and alerts you when you exceed a tax registration threshold based on your Stripe transactions. It can also register to collect tax on your behalf in the US, automate US filings in the Dashboard, and manage global 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 over 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 you need to register for a sales tax in the US, let Stripe manage your tax registrations. You'll benefit from a simplified process that prefills application details – saving you time and simplifying compliance with local regulations. If you need help registering outside of 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 automates US filings in the Dashboard, powered by TaxJar. For global filings, 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. US tax filings can be automated in the Stripe Dashboard, powered by TaxJar.

Learn more about Stripe Tax or get started today.