It's one of the most common questions small online sellers ask: "Do I need to charge sales tax?" The answer depends on a few factors. Let's walk through them.

The Short Answer

You probably need to charge sales tax if:

You're selling taxable products (most physical goods)
You have nexus in the customer's state
You're not using a marketplace that handles it for you

Let's break down each of these.

Step 1: Are Your Products Taxable?

Most physical products are taxable. Some common exceptions:

Usually NOT taxable:

Groceries (in most states)
Prescription medications
Certain clothing (in some states like Pennsylvania)
Digital products (varies widely by state)

Usually taxable:

Handmade crafts
Clothing and accessories
Electronics
Home goods
Art and collectibles

If you sell physical products that aren't food or medicine, they're probably taxable.

Step 2: Do You Have Nexus?

"Nexus" means you have enough connection to a state that you're required to collect their sales tax. There are two types:

Physical Nexus

You have physical nexus if you have:

A home or office in the state
Employees in the state
Inventory stored there (including Amazon FBA warehouses)
Regular presence at trade shows or markets

Economic Nexus

You have economic nexus if you exceed the state's sales threshold, typically:

$100,000 in sales, OR
200 transactions

Most states have eliminated the transaction threshold, so it's usually just about dollar volume now.

Start with your home state. If you live in a state with sales tax, you almost certainly need to collect it on sales to customers in that state.

Step 3: Are You Using a Marketplace?

If you sell on these platforms, they handle sales tax collection for you:

Etsy
Amazon
eBay
Walmart Marketplace
Shopify (with their tax service enabled)

This doesn't mean you have zero obligations (you may still need permits and filing), but the collection and remittance is done for you.

If you sell on your own website, you're responsible for everything.

Quick Decision Tree

Do you sell physical products?
├── No → Probably no sales tax (but check your state for digital goods)
└── Yes → Continue...

Do you sell on Etsy/Amazon/eBay?
├── Yes → They collect for you (but you may need permits)
└── No → Continue...

Do you have nexus in any state?
├── No → No sales tax needed yet
└── Yes → You need to collect sales tax in those states

What If I'm Just Starting Out?

If you're a brand new seller with minimal sales:

Register in your home state (if it has sales tax)
Collect sales tax on in-state sales
Track your out-of-state sales by state
Register in other states when you approach their thresholds

You don't need to register everywhere on day one. Start with your home state and expand as you grow.

What Happens If I Don't Collect?

If you should be collecting sales tax but aren't:

You may owe back taxes plus penalties and interest
Some states have voluntary disclosure programs that reduce penalties
The longer you wait, the bigger the problem

It's much easier (and cheaper) to get compliant early than to clean up a mess later.

The Five States Without Sales Tax

Good news if you or your customers are in:

Alaska (though some localities have sales tax)
Delaware
Montana
New Hampshire
Oregon

No state sales tax means no state sales tax obligations.

Next Steps

Figure out where you have nexus (start with your home state)
Register for a sales tax permit in those states
Set up tax collection in your store
File returns on schedule (monthly, quarterly, or annually)

The Bottom Line

Most online sellers need to charge sales tax somewhere, even if it's just their home state. The key is understanding where you have nexus and making sure you're collecting in those states.

Tools like Sails can automate most of this: calculating the right rates, tracking your nexus, and reminding you when to file.

Still not sure about your sales tax obligations? Try Sails free and we'll help you figure it out.

Do I Need to Charge Sales Tax? A Simple Guide for Online Sellers