U.S. sales tax is a state and local consumption tax, with 45 states + D.C. imposing it and thousands of local jurisdictions adding complexity. Most goods are taxable, while essentials like food or medicine may be exempt; some services and digital products are taxed depending on the state. Businesses must determine nexus (physical, economic, or affiliate presence) to know where to register, collect, and remit tax. Key steps include registration, applying correct rates, issuing compliant invoices, and timely filing (even for zero sales). The SSUTA simplifies compliance across 23 states + TN. Robust tax tracking and automation are essential to minimize audit risk.
Guide to U.S. Sales Tax: Key Concepts and Compliance for Businesses
Public
Other countries
Author: Ljubica Blagojević
Category:
General information
Views:
367
Content accuracy validation date:
17.10.2025
Content accuracy validation time:
08:19h
- What Is U.S. Sales Tax?
U.S. sales tax is a state- and local-level consumption tax, charged once at the final sale to the end consumer. Unlike VAT or GST systems, it is not federal — rules and rates vary by state and even by local jurisdiction.
- Coverage: 45 states + D.C. have statewide sales tax; 5 states (AK, DE, MT, NH, OR) do not.
- Local Taxes: 38 states also levy local sales taxes, creating thousands of taxing jurisdictions.
- Business Classification: Sellers are either in-state or remote sellers (out-of-state/online).
- What’s Taxable?
Taxability varies but generally includes:
- Tangible Goods: Most merchandise is taxable, though essentials (food, medicine) may be exempt or benefit from tax holidays.
- Services: Professional services (legal, accounting) usually not taxed; repair, installation, or maintenance services often are.
- Software & Digital Goods: Tax rules differ widely (downloaded vs. SaaS vs. PaaS). States treat software as tangible or digital differently.
- Rental Equipment: Typically taxable, with rates from ~3–7%, plus possible local surcharges.
- Exemptions
Exemptions can apply based on:
- Product Type: Food, medicine, education/healthcare items.
- Use: Resale or manufacturing inputs.
- Buyer: Government, nonprofits, religious/charitable institutions.
Exempt sales require a valid exemption certificate per state.
- Sales Tax Nexus (Liability Trigger)
A nexus is a connection creating tax obligations. Nexus may be:
- Physical: Retail store, warehouse, employee, or office.
- Economic: Meeting a sales threshold (e.g., $100,000 or 200 transactions/year in a state).
- Affiliate or Click-Through: Marketing affiliates or online advertising in a state.
If nexus exists, businesses must register, collect, and remit tax in that state.
- Compliance Steps
- Obtain EIN (if required).
- Register for Sales Tax in nexus states (can register across 24 SSUTA states with one process).
- Determine Customer Location – collect evidence for jurisdictional accuracy.
- Apply & Collect Sales Tax at sale.
- Issue Proper Invoices showing tax details.
- File Returns per state requirements (including “zero returns” where registered but no sales occurred).
- Streamlined Sales Tax (SSUTA)
23 member states + TN (associate) have adopted the Streamlined Sales & Use Tax Agreement, which standardizes definitions and allows centralized registration and electronic filing, simplifying multi-state compliance.
The U.S. sales tax system is fragmented and complex, requiring businesses — especially e-commerce sellers — to track:
- Product taxability (goods vs. services, digital vs. physical).
- Nexus thresholds per state.
- Jurisdiction-specific rates and rules for accurate collection.
Proper compliance minimizes audit risk and penalties. Businesses selling nationwide must invest in robust sales tax automation, recordkeeping, and timely filing to stay compliant across multiple jurisdictions.
Other news from Other countries
Preparing for VAT in Qatar: Essential E‑Invoicing Steps for Businesses
Public
Other countries
Author: Ema Stamenković
Other countries
Author: Ema Stamenković
Qatar is advancing towards mandatory e-invoicing aligned with VAT. Key requirements include registration with tax authority, ERP integration, and timely structured invoicing. Benefits include faster reconciliation, improved compliance, and reduced fraud. Governance risks must be addressed early. An action plan involves gap analysis, pilot testing, and team training. All businesses must prepare, re... Read more
UAE to Launch E‑Invoicing Pilot in July 2026
Public
Other countries
Author: Ema Stamenković
Other countries
Author: Ema Stamenković
UAE will implement mandatory Peppol-based e-invoicing starting 2027, using a decentralized model. Key timelines include technical specs in June 2025, pilot phase in July 2026, and B2G transactions by October 2027, with exclusions for specific services. UAE is launching mandatory Peppol-based e-invoicing and e-reporting in 2027 using a decentralised CTC and Exchange Model (DCTCE) with Peppol PINT 5... Read more
New document was uploaded: Q&A from the webinar: Brazil enters new Era
Public
Other countries
Author: Ivana Picajkić
Other countries
Author: Ivana Picajkić
On November 27th, 2025, Fiscal Solutions organized a free webinar on the topic of "Brazil enters a new Era". The webinar was held by Fiscal Solutions Legal Consultant Ivana Picajkić. Let’s find out more about answers to questions asked during the webinar We answered the questions such as,: Are there any exceptions from the fiscalization obligation? Are the requirements that a company has to... Read more
New webinar was uploaded: Recorded webinar: Brazil Enters New Era – SW Fiscalization Takes Over Brazil
Public
Other countries
Author: Ivana Picajkić
Other countries
Author: Ivana Picajkić
On November 27 , 2025, Fiscal Solutions organized a free webinar on the topic „Brazil enters new era – SW fiscalization takes over Brazil“ The webinar was held by Ivana Picajkić, Legal Consultant at Fiscal Solutions The following topics were discussed during this webinar:- From old to new: Brazil’s fiscalization journey- Hardware fiscalization: Where it still applies- NFC-e: The new era of... Read more
Thailand's e-Tax Invoice System: A Digital Transition for Business Documents
Public
Other countries
Author: Ljubica Blagojević
Other countries
Author: Ljubica Blagojević
An e–Tax Invoice is a digital tax invoice that replaces paper documents, regulated by Ministerial Regulation No. 384, the Electronic Transactions Act, and ICT Standard Recommendation No. 3-2560. Thailand offers two types: e–Tax Invoice & e–Receipt for all businesses, requiring a Digital Signature and Electronic Certificate, and e–Tax Invoice by Email for small businesses (≤ THB 30 million), verifi... Read more
Philippines Senate Proposes Abolishing VAT and 3% Percentage Tax
Public
Other countries
Author: Ljubica Blagojević
Other countries
Author: Ljubica Blagojević
The Philippine Senate is reviewing Bill No. 1450, which proposes to abolish the current VAT system and remove major VAT rules from the tax code, including those on taxable persons, invoicing, digital transactions and input credits. The bill also aims to scrap the 3% percentage tax for small VAT-exempt businesses under PHP 3 million in annual sales. If enacted, the reform would take effect 15 days... Read more
Brazil's Major Tax Modernization: Five Complex Taxes Replaced by Unified Dual VAT
Public
Other countries
Author: Ljubica Blagojević
Other countries
Author: Ljubica Blagojević
Brazil’s 2026–2033 tax reform replaces five complex consumption taxes with a unified dual VAT system (CBS and IBS) and introduces a Selective Tax on harmful goods. The OECD praises it as a major modernisation. The reform adopts the destination principle, zero-rates exports, and harmonises rates nationally, with reduced rates for key sectors and zero-rating for essential foods. It creates a non-cum... Read more