This depends on several factors, including:
Generally, you need to collect and remit sales tax if you have "Nexus" in a state. There are two types of nexus, Physical Nexus, and Economic Nexus. To determine your specific obligations, consider using our Nexus Calculator or consulting with a sales tax professional.
You may have triggered sales tax nexus if you have a physical presence in a state or if you've reached the economic nexus threshold for a particular state. Economic nexus thresholds vary by state but are typically based on a dollar amount sales threshold, but can be coupled with a transaction volume threshold as well.
To determine if you've triggered nexus, you can:
Use our Nexus Calculator
Review our "What is Nexus & Taxability" guide
Consult with a sales tax expert for a personalized assessment
Platforms like Amazon or Etsy are also referred to as ‘marketplaces’ and are liable to collect and remit sales tax on behalf of sellers (marketplace facilitator laws). While this absolves you from sales tax matters in most cases you may still have sales tax obligations depending on your situation.
Things to be aware of:
State(s) where you have established physical nexus may still ask that you be registered with the state tax commission and file returns stating $0 sales tax collected & remitted – noting the marketplace facilitator is handling sales tax for you. Variable by state
You will still want to keep track of your sales across all platforms, including these marketplaces, to determine if you've triggered economic nexus.
If economic nexus has been triggered, you will be required to collect and remit sales tax for any sales made outside of the marketplace platform when that sales comes from the location where nexus was triggered.
For platform-specific guidance, consult our resources or speak with a sales tax expert.
Taxability varies widely by state and product/service type. Generally:
Most tangible personal property is taxable
Some services are taxable, depending on the state
Digital products may or may not be taxable
Some items like groceries or prescription medications are often exempt
To determine the taxability of your specific products or services:
Check our "What is Sales Tax" guide for general information
Research the specific laws for each state where you have nexus
Consult with a sales tax professional for complex situations
The best sales tax software for your business depends on your specific needs, budget, and sales volume.
Some popular options include Ceretax, Avalara, and Vertex.
To choose the right software:
Read our "Which Sales Tax Software is Best for You" article for a comparison of options
Consider factors like integration with your e-commerce platform, automation capabilities, and pricing
Take advantage of free trials offered by software providers
Consult with a sales tax expert for personalized recommendations
Remember, while software can help automate many aspects of sales tax compliance, it's still important to understand your obligations and ensure the software is set up correctly for your business. Utilizing a consultative approach may be the best route for you and your business.