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Sales Tax by State: U.S. Insights for Amazon & Shopify Sellers

Practical guides, state-by-state resources, and compliance updates – designed for sellers in the U.S. and worldwide.

Knowledge Hub

Expanding into the U.S. is exciting, but sales tax rules can feel overwhelming. That’s why we’ve created the Knowledge Hub – a clear, practical resource for ecommerce sellers on Amazon, Shopify, and Walmart.

Every article is written for business owners – no jargon, just straightforward guidance to keep your U.S. sales tax compliance on track.

Sales Tax Compliance (State-by-State Guides)

Understand U.S. sales tax rules, thresholds, and filing requirements.

Companies selling in the U.S. are generally required to collect sales tax on taxable sales, and understanding when and how to collect sales tax is a key part of compliance.

Sales Tax Basics & Updates

Stay informed on changing U.S. sales tax laws and practical compliance tips.

Common Questions from Ecommerce Sellers | Sales Tax By State

Below, we answer some of the most commonly asked questions and commonly asked questions from ecommerce sellers about U.S. sales tax compliance.

❓ What is the difference between sales tax and use tax in the United States?

Sales tax is charged on retail sales of tangible goods and some services at the point of sale. Most transactions involving tangible goods or taxable services are subject to either sales tax or use tax, except for those specifically exempted. Use tax applies when goods are purchased out-of-state and brought into a state for use, storage, or consumption, and is typically applied at the state’s use tax rate, which may differ from the sales tax rate. Both taxes ensure states collect revenue from taxable transactions, whether the sale occurs locally or remotely.

❓ How do state and local sales tax rates differ?

Each state sets its own state sales tax rate, but counties, cities, and special districts can impose local sales taxes on top of that rate; for example, a city sales tax may be imposed in addition to county and state taxes. Each local jurisdiction may set its own local sales tax rate, which can differ from neighboring areas. The total amount businesses collect—often referred to as the combined rate or combined state and local rate—includes all applicable state and local taxes. These rates can vary even between neighboring towns (for example, the local tax rate in one town may be 1%, while a neighboring town’s local tax rate is 2%).

❓ Do all U.S. states impose sales tax?

No. While forty five states and Washington, D.C. imposes a statewide sales tax (a type of state tax imposed on retail sales), five states—New Hampshire, Oregon, Montana, Alaska, and Delaware—do not have a statewide sales tax. However, Alaska allows local jurisdictions to impose their own local taxes. Other states may have different rules or exemptions regarding sales tax.

❓ How often do sales tax rates change?

Sales tax rates change frequently due to new state or local legislation. Many rate changes take effect on January 1, marking the start of the calendar year for new tax laws and policy updates. Many tax rate changes also take effect on July 1, which is another common date for legislative updates.

Counties and cities may adjust their local tax rates throughout the year, and many localities across the country regularly update their local tax rates. Businesses must stay up to date to ensure accurate collection and reporting. Businesses should consult rate tables to verify the current rate in each jurisdiction.

❓ What is an excise tax, and how does it differ from sales tax?

Excise taxes apply to specific goods or activities such as fuel, alcohol, or tobacco, including alcoholic beverages, and are often considered an additional tax beyond standard sales tax. Excise taxes are typically included in the price of the item and are separate from general state and local sales taxes.

In some jurisdictions, additional taxes may be imposed on top of excise and sales taxes for specific purposes, such as funding transportation projects or local improvements.

❓ Are some goods and services exempt from sales tax?

Yes. Many states exempt certain goods such as unprepared food, prescription medicine, and clothing. These transactions are considered exempt sales and may require proper documentation or exemption certificates to qualify under state law. In addition to full exemptions, some states offer reduced rates for specific goods or services, providing a lower sales tax rate instead of a complete exemption. The taxability of services also varies by state; some tax digital goods or professional services, while others do not.

❓ How do food exemptions work under U.S. sales tax law?

Food exemptions differ widely by state. Some states apply a lower rate to food items rather than exempting them entirely. For example, Kansas reduced its sales tax on unprepared food to 0% in 2023, with full elimination planned for 2025. Always verify state-specific rules before collecting or remitting tax on food sales.

❓ What is a sales tax holiday?

A sales tax holiday is a temporary exemption period during which specific items—often school supplies, electronics, or clothing—are not subject to sales tax. These holidays vary by state and date, so retailers must adjust systems accordingly.

In some cases, sales tax holidays or exemptions may be treated as deductions when calculating taxable sales.

❓ What is economic nexus, and why does it matter?

Economic nexus laws require out-of-state or remote sellers to collect and remit sales tax once they exceed a certain threshold of sales volume or number of transactions within a state, even without a physical presence. Once nexus is established, sellers are required to pay sales tax and report their collections to the state. This is particularly important for Amazon and Shopify sellers. Ensuring proper sales tax compliance is essential for remote sellers to avoid penalties and meet state regulatory requirements.

❓ How do special jurisdictions and tribal lands affect sales tax?

Some areas—such as Indian reservations or federal entities—may have unique rules or exemptions imposed by tribal or federal authorities. Businesses should confirm whether state and local taxes are imposed or apply when selling to or operating in these jurisdictions.

❓ Why are sales and use taxes important to state governments?

Sales and use taxes are a primary source of state and local revenues, funding essential public services such as transportation, education, and public safety. These revenues support public investments in infrastructure, education, and other critical services. Because of their revenue importance, compliance and timely reporting are strictly enforced.

❓ How can businesses stay compliant with U.S. sales tax laws?

Businesses must track rate changes, understand taxability rules, and determine where they have nexus. Many companies rely on automated tax calculation software or professional services to manage compliance, helping ensure accurate reporting and timely filing across all states.

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❓ What should sellers include when listing states for sales tax reporting?

Each listing should include the state name, local jurisdiction details, and ZIP code, since the total tax rate depends on state rate + county rate + city rate. In some jurisdictions, counties impose a county surtax rate, which is an additional percentage added to the base rate to fund local projects such as transportation or education. Sellers should reference tax rates by state, including details on state rates, county taxes, and any applicable surtax rate, to ensure accurate reporting. Washington, D.C. should always be included in nationwide reporting or analysis.

❓ What happens if a business fails to comply with sales and use tax requirements?

Noncompliance can lead to penalties, fines, interest, and back taxes imposed by state authorities. States may also audit sellers who under-collect or fail to remit taxes. Staying proactive and using reliable compliance systems helps minimize these risks.

❓ How are digital products taxed in the United States?

The taxation of digital products—such as e-books, downloadable software, and streaming services—varies widely across the United States. Each state sets its own rules for how digital goods and services are treated under sales tax and use tax laws. In some states, like Louisiana, digital products are subject to the same state sales tax rates as tangible personal property, meaning businesses must collect sales tax on every qualifying digital sale. In contrast, states like Nevada exempt certain digital goods from sales and use tax, making it essential for businesses to understand the specific regulations in each jurisdiction where they operate.

Sales tax rates for digital products can differ from those applied to physical goods. For example, while Kansas has reduced the sales tax rate on unprepared food to 0%, digital products may still be taxed at the standard state and local sales tax rates. Additionally, some states offer sales tax holidays that temporarily exempt digital products from tax, providing opportunities for both consumers and businesses to benefit from lower costs during these periods.

For remote sellers and ecommerce businesses, navigating the patchwork of state sales tax rates and local sales tax rates is crucial for compliance. States like South Dakota have implemented economic nexus laws, requiring businesses to collect and remit sales tax on digital sales based on the volume of transactions, regardless of physical presence. This means that even if a business is located out of state, it may still be required to collect sales tax from customers in states where it exceeds certain sales thresholds.

To accurately determine the correct tax rate for digital products, businesses can use a tax rate lookup tool or consult with a tax professional familiar with the latest sales tax regulations. Since tax rates and rules for digital products can change frequently, staying informed is essential to avoid compliance issues and potential penalties.

In summary, the taxation of digital products in the U.S. is complex and highly dependent on state and local laws. Businesses must be diligent in understanding the sales tax rates, local sales tax rates, and use tax rates that apply to their digital offerings. By keeping up with changing regulations and leveraging the right tools, businesses can ensure proper sales tax collection and maintain compliance across all relevant jurisdictions.

❓ What determines whether a sales tax applies to a particular transaction?

Sales tax applies when a taxable good or service is sold as part of a taxable transaction as defined by state law within a jurisdiction that imposes a state or local sales tax. Whether a transaction is taxable depends on the tax base established by that state — meaning which goods, services, or digital items fall under its definition of taxable sales.

Each transaction must also be sourced to the correct county, city, or local jurisdiction, as local rules can modify how the tax applies. Businesses must determine whether their sales are taxable at the same rate as other goods or if reduced or special rates apply.

Knowing which sales are taxable and which qualify for exemptions is central to sales tax compliance — and this assessment often requires expert guidance.

❓ What are combined rates, and how do they impact total sales tax liability?

A combined rate represents the total percentage of tax owed when all applicable layers are added together: the state sales tax rate, county tax, city tax, and sometimes special district taxes.

For example, a business might operate in a county that adds 1% and a city that adds 0.5% to a 6% state rate — creating a combined rate of 7.5%. These differences matter greatly when filing, since most state returns require reporting by jurisdiction.

Failing to apply the correct combined rate can cause over-collection or under-collection, both of which create audit exposure.

❓ How do taxable goods differ from non-taxable or exempt goods?

Taxable goods are those specifically listed within a state’s tax base — most physical products such as electronics, home goods, and clothing. Each taxable item is subject to sales tax according to state rules.

Non-taxable goods are those explicitly exempted, like groceries or prescription medications. Some states impose tax only on certain items within a category (for example, clothing over a specific dollar amount).

Even when an item is exempt, the use tax may still apply if it’s later used in a taxable business activity.

Understanding the line between taxable and exempt goods requires evaluating the intended use, purchaser type, and state-specific exemptions — all of which our team reviews for accuracy.

❓ How does physical presence affect whether a business must collect sales tax?

A physical presence — such as an office, warehouse, employee, or inventory — automatically creates nexus, obligating the business to register and collect sales tax in that state.

Even temporary activity like attending trade shows or storing goods in a fulfillment center can create nexus. Many online sellers discover they have nexus through third-party warehouses used by marketplaces.

Because every state defines physical presence differently, professional nexus mapping is vital to avoid missing filing requirements.

❓ Why do local jurisdictions, county taxes, and special districts complicate reporting?

In addition to state rates, more than 10,000 local jurisdictions in the U.S. can impose county taxes or city-level surtaxes. In Florida counties, for example, local discretionary sales surtaxes are common and may have a specific expiration date that affects reporting requirements.

Some even have overlapping special districts — such as transit authorities or stadium zones — that collect additional fractions of a percent.

Returns must separate each jurisdiction’s collections accurately. An incorrect allocation between countycity can trigger reconciliation errors and penalties.

Properly classifying sales by jurisdiction is a key step handled during our monthly compliance process.

❓ What are special taxes, and how do they differ from general sales taxes?

Special taxes apply to defined industries or activities, such as short-term lodging, telecommunications, or entertainment admissions.
They are separate from general sales taxes but often appear on the same customer invoice.

For example, a hotel may collect both the state sales tax and an additional local lodging tax. Businesses must know when these additional taxes apply to avoid underpayment.

Integrating special tax requirements into sales systems ensures accurate remittance and reduces post-filing corrections.

❓ How do state and local sales tax systems vary across the forty-five states that impose them?

While forty-five states impose statewide sales taxes, each operates independently.
Some use origin-based sourcing, taxing sales from where the seller is located, while others use destination-based sourcing, taxing where the customer receives the goods.
Local rates, taxable goods, and filing rules differ even between neighboring jurisdictions.

This patchwork means no two states share identical compliance rules.

That’s why national sellers typically delegate multi-state compliance to a single coordinated provider — ensuring consistent treatment across all states and localities.

❓ How do Indian reservations and other sovereign territories fit into U.S. sales tax law?

Transactions occurring on Indian reservations or between tribal entities and non-tribal businesses can follow distinct rules based on sovereign status and intergovernmental agreements.
Some states recognize tribal tax authority separately, while others share tax revenue under cooperative compacts.

Because of these variations, sales on tribal lands should be reviewed carefully to determine whether state sales tax applies or if the transaction is exempt.

Our compliance team routinely reviews sales within sovereign and cross-jurisdictional areas to ensure filings remain accurate and defensible.

❓ How do changes in tax bases and filing rules affect ongoing sales tax compliance?

Each year, states adjust their tax bases—the list of taxable goods and services—to reflect new industries, technologies, or policy goals. Changes in the tax base may also affect the taxation of goods used in producing goods, such as raw materials or components. For example, a state may begin taxing digital subscriptions or lower the rate on unprepared food while increasing the state-level sales tax rate on prepared meals. These updates influence how businesses classify taxable items, calculate collections, and file returns.

Because local jurisdictions can also modify their rate structure or due dates, compliance requires continuous attention. Businesses must review updated filing instructions, verify they’re remitting under the correct category, and document any adjustments in their compliance reporting. Even a small change in classification can impact monthly filings or create exposure during an audit. Changes in filing rules may also impact how businesses report tax sales, requiring updated documentation and procedures.

Our role is to monitor these shifts in real time and ensure every return reflects the latest tax law changes before submission.

❓ What tools and resources can sellers use to calculate sales tax rates accurately?

Accurately calculating sales tax rates is essential for any business engaged in retail sales, especially when dealing with multiple states, local sales taxes, and ever-changing tax rates. Fortunately, a variety of tools and resources are available to help sellers determine the correct sales tax rate for every transaction and maintain full sales tax compliance.

One of the most valuable resources is a tax rate lookup tool. These tools allow sellers to enter a specific address or ZIP code and instantly retrieve the current sales tax rate, including any applicable local sales taxes, discretionary sales surtax, or excise taxes. Many state and local governments provide official tax rate lookup tools and rate tables on their websites, making it easy to verify the latest tax rates for any business location.

In addition to government resources, specialized sales tax software—such as TaxJar, Avalara, or similar platforms—can automate the process of sales tax collection and calculation. These services are especially useful for businesses operating in states with complex local sales tax structures, like New York, where local governments frequently update their tax rates. Sales tax software can also help manage sales tax compliance by tracking changes in tax laws, generating tax returns, and ensuring that all sales and services are taxed at the correct rate.

For sellers who prefer a more hands-on approach, consulting state and local government websites is a reliable way to access up-to-date rate tables, calculators, and detailed information about local sales taxes and excise taxes. These sites often provide downloadable resources and guidance on how to apply the correct tax rate to different types of sales.

Working with tax professionals or accounting firms is another effective strategy, especially for businesses with complex sales tax obligations or those operating in multiple jurisdictions. Tax experts can offer personalized advice on sales tax compliance, help interpret local tax laws, and ensure that all sales tax collection and remittance is handled accurately.

Finally, some businesses choose to partner with sales tax compliance services that specialize in managing every aspect of sales tax, from rate determination to filing returns. These services provide access to comprehensive tax rate data, automated calculations, and ongoing support to help sellers stay compliant with both state and local governments.

By leveraging these tools and resources, sellers can confidently navigate the complexities of sales tax rates, local sales taxes, and changing regulations. Staying informed and using the right solutions not only reduces the risk of errors and audits but also ensures that every taxable sale is handled correctly—no matter where your customers are located.

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