Sales & Use Tax · United StatesSince 2018, you can owe sales tax in a state without ever setting foot in it.
We check where your sales create nexus, register you in the right states, and keep returns, exemption certificates and marketplace sales in order.
Tax
At a glance
- Authorities
- State departments of revenue · Local taxing jurisdictions · Streamlined Sales Tax Governing Board
- Forms & references
- Streamlined Sales Tax Certificate of Exemption (Form F0003)MTC Uniform Sales & Use Tax Resale CertificateTexas Form 01-339California Form CDTFA-401
- Administered by
- Each state’s revenue department, plus local jurisdictions in many states
- Economic nexus
- Commonly $100,000 of annual sales into a state; thresholds vary by state
- Marketplace sales
- Marketplace facilitators such as Amazon generally collect on sales they facilitate
- Filing frequency
- Monthly, quarterly or annually, assigned by each state based on your volume
Overview
What it is, and why it matters.
Sales tax in the US is set by states and local governments, not the federal government. Forty-five states and the District of Columbia have a statewide sales tax, and many cities and counties add their own. Rates, taxable products and filing rules differ in each.
Until 2018, a seller generally had to collect sales tax only where it had a physical presence. The Supreme Court’s decision in South Dakota v. Wayfair allowed states to require collection based on sales volume alone, and every state with a sales tax now has an economic nexus rule. Many use $100,000 of annual sales into the state, some use higher figures such as $500,000, and a growing number, including Illinois and Utah, have dropped the older 200-transaction test.
Use tax is the other side. When you buy taxable goods or services for your business and the seller did not charge sales tax, you usually owe use tax to your state on those purchases. It is often forgotten until an audit.
Who needs it
Who typically needs it.
- 01
Ecommerce sellers
Shopify, WooCommerce and multichannel sellers shipping physical goods to customers in many states.
- 02
Amazon and marketplace sellers
Sellers who rely on marketplace collection but also have direct sales, inventory in fulfillment warehouses, or registration questions.
- 03
SaaS and digital product companies
Software and digital goods businesses selling into states that tax them. Treatment varies widely from state to state.
- 04
Wholesalers and distributors
Businesses selling for resale that need valid resale and exemption certificates on file.
- 05
Foreign sellers into the US
Companies based in Pakistan, the UK or elsewhere selling directly to US customers in states where they meet the threshold.
When you need it
The moments that usually trigger it.
- Your sales into a state have passed, or are close to, its economic nexus threshold.
- You’ve started storing inventory in a third-party or marketplace fulfillment warehouse in a new state.
- A state has sent you a nexus questionnaire or a notice about unregistered sales.
- You’re preparing for due diligence in a fundraise or sale, and the other side is asking about sales tax exposure.
- A large customer says it is exempt and you need the right certificate on file.
- You’ve realized you should have been collecting in a state for the past few years.
Scope
Exactly what we handle.
Our engagement letter lists these specifically, so you know what is included before any work begins.
- 01
A nexus study comparing your sales by state with each state’s physical and economic nexus rules and marketplace facilitator laws.
- 02
A taxability review of your products or services in the states where you have nexus, including software and digital goods.
- 03
Registering for sales tax permits with state revenue departments, or through the Streamlined Sales Tax Registration System where it fits.
- 04
Checking the sales tax settings in Shopify, Amazon, Stripe or tax software such as Avalara or TaxJar against your registrations.
- 05
Preparing and filing monthly, quarterly or annual returns and remitting the tax.
- 06
Collecting and reviewing resale and exemption certificates.
- 07
Reviewing purchases for use tax where the seller did not charge tax.
- 08
Voluntary disclosure agreements (VDAs) to resolve past exposure, which typically limit the lookback period and waive most penalties.
The process
How it runs, step by step.
Timings depend on the authority and on how quickly documents come together. We tell you what’s typical for your case at the start.
Start with a conversationSales data review
You export sales by state, split by direct and marketplace channels, for the current and recent years.
Nexus and taxability analysis
We compare your sales with each state’s thresholds and tax rules and show where you have, or are approaching, nexus.
Decide on past exposure
Where you should have registered earlier, we compare registering now with a voluntary disclosure agreement.
Register and configure
We file state registrations and check that your checkout or tax engine settings match them.
File and monitor
Returns are filed at each state’s assigned frequency, and we re-check thresholds as your sales grow.
What we’ll need
The information to have ready.
A typical checklist. After the first conversation we send a version specific to your situation, so you don’t gather anything you don’t need.
Sales data
- Sales by state and by month, split between direct and marketplace sales
- A list of products or services with descriptions
- Platform reports from Shopify, Amazon, Stripe or similar
Business presence
- Locations of offices, employees and inventory, including fulfillment warehouses
- Existing state registrations and account numbers
Purchases and exemptions
- Exemption and resale certificates received from customers
- Significant purchases where no sales tax was charged
Please don’t email passports or bank statements. Once we’ve spoken, you’ll get access to a secure upload.
Common mistakes
Where this usually goes wrong.
The problems we are most often asked to fix, and what they tend to cost.
- Mistake 01
Assuming marketplace collection covers everything
Marketplace facilitators generally collect on sales made through their platforms, but sales through your own website, and in some states your registration obligations, remain your responsibility.
- Mistake 02
Registering and then not filing
Once you are registered, most states expect a return every period, even with no sales. Missing zero returns leads to penalties and estimated assessments.
- Mistake 03
Accepting incomplete exemption certificates
If a certificate is missing or invalid, the state can hold the seller liable for the uncollected tax on audit.
- Mistake 04
Waiting on past exposure
Uncollected sales tax does not go away. Once a state contacts you first, voluntary disclosure is usually no longer available and penalty relief is harder to get.
Worth knowing
The limits, stated upfront.
Rules differ by state and change often. Thresholds and taxability are confirmed state by state when we scope your work.
Locally administered sales taxes, such as those in some Colorado home-rule cities and Louisiana parishes, can need separate registrations and add time.
Returns rely on the sales data you provide; errors in platform exports flow through to the filings.
Voluntary disclosure terms are set by each state and are not guaranteed. Contested audits and appeals may need a state tax attorney.
Questions
Sales & Use Tax: frequently asked.
If yours isn’t here, ask us directly. We’ll answer in plain terms.
Ask a questionWhat is economic nexus?
Economic nexus means a state can require you to collect its sales tax because of how much you sell there, even without an office, staff or inventory in the state. The Supreme Court allowed it in its 2018 decision in South Dakota v. Wayfair. Each state sets its own threshold.
What is the economic nexus threshold in most states?
Many states use $100,000 of sales into the state over the current or previous year. Some, including California, Texas and New York, use $500,000, and New York also has a transaction count. We confirm current thresholds, and how each state measures them, when we review your data.
I only sell on Amazon. Do I need to register anywhere?
Often not for collection, because Amazon collects as a marketplace facilitator on the sales it facilitates. Some states still expect registration or returns from marketplace sellers, particularly where you hold inventory, and the rules differ. We check this state by state.
What is use tax?
Use tax is owed on taxable items you buy for use in a state when no sales tax was charged, for example equipment bought from an out-of-state seller. Businesses report it on their sales and use tax return or a separate use tax return, depending on the state.
What is a voluntary disclosure agreement?
A VDA is an arrangement with a state to come forward about past uncollected tax before the state contacts you. In return, states typically limit how many years back they assess and waive most penalties, though interest usually still applies. Terms vary by state.
Is software or SaaS subject to sales tax?
It depends on the state. Some states tax SaaS and digital goods, others exempt them, and some tax only part of the charge. We review taxability for your specific products in each state where you have nexus.
Do I file if I had no sales in a period?
Usually, yes. Most states expect a return for every assigned period once you are registered, even when nothing is due.
Related
Often needed alongside this.
The equivalent in our other countries
Speak with a consultant
Talk to us about sales & Use Tax.
Pick the closest match and we’ll take it from there. You’ll get a written scope and fee before any work begins.
Or use our three-step guide, or email hello@fiscorra.com
