US taxes reference
The United States does not charge a federal sales tax. Instead, sales tax is calculated according to state, county, and municipality, according to physical or economic nexus. This page is a general guide to US taxes and doesn't replace any official government information or regulations. If you're not sure about anything related to your taxes, then contact US state tax authorities or a tax professional.
If you determine that you need to charge sales tax in one or more states, then you need to contact each of the relevant agencies and register with them. The process varies depending on where your business is based, where you sell, and individual government requirements.
Nexus
If there is a nexus, or connection, between your business and a state, then you probably need to charge sales taxes there. A nexus can be physical or economic.
Physical nexus
Traditionally, physical nexus occurs when you have a physical presence in a state, such as a store or warehouse. Some states have a broader definition of nexus, and can include any of the following:
- Solicitation of sales
- Fulfillment services
- Presence of inventory
- Presence of employees
Economic nexus
Economic nexus occurs when you exceed a certain threshold of sales to customers in a specific state.
In June 2018, the Supreme Court of the United States ruled that states can require online sellers to collect sales tax based on the volume or value of transactions into a state, also known as economic nexus. For information about how this ruling might affect your business, refer to the Shopify blog post Online Sales Tax: A Guide to Economic Nexus & Ecommerce.
The sales threshold that determines whether you have nexus is different for each state. If you're not sure whether your sales to customers in another state mean that you have nexus there, then consult with the state's tax authorities or a local tax professional.
Tax sourcing
The tax rates that you charge are affected by whether your state is an origin state or a destination state.
Destination states
In a destination state, the sales tax you charge is based on the address of your customer.
If you have no nexus in the state of the shipping address, then no tax is charged.
If you have nexus in the state of the shipping address, then the customer's location is used to determine taxes.
Origin states
In an origin state, the sales tax you charge is based on your location's nexus.
If you have no nexus in the state of the shipping address, then no tax is charged.
If you have a physical nexus in the state of the shipping address, then the location of your nexus is used to determine taxes. If you have a nexus but no physical location, then the customer's location is used to determine taxes.
Remote seller rules
A remote seller is a merchant that isn't physically located in a particular state, but has economic nexus there. Most states have rules determining what defines a remote seller. If you're not sure whether selling in a particular state creates economic nexus for you, then you should consult with US state tax authorities or a local tax professional.
Notice and report states
Notice and report tax laws exist in some states to ensure that customers pay a use tax. If you do not have nexus in these states but sell to customers there, then those customers are responsible for paying a use tax to the state, rather than paying sales tax to the seller.
Each state that uses notice and report tax laws has different rules, but in general, if your sales to customers in another state pass a certain threshold then you might be required to do the following:
- Create a notice in your store that indicates customers might need to pay use tax.
- Create a notice in your checkout process that indicates customers might need to pay use tax.
- Send an annual notice to customers spending over a certain amount in your store, reminding them that they owe use tax.
- Send an annual notice to the state, reporting information about customers that owe use tax.
The following states use notice and report tax laws:
Alabama | Colorado | Kentucky | Louisiana | Oklahoma |
Pennsylvania | Rhode Island | South Dakota | Tennessee | Vermont |
Washington |
Because requirements and thresholds vary by state, you should check with US state tax authorities or a local tax professional to ensure you're following notice and report laws correctly.
State tax reference
There are five states that don't have a state-wide sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. Although there aren't any taxes levied at the state level, you still might need to collect municipal taxes.
You don't need to register with all of these agencies, only those that apply to you. You can refer to this guide for more information on individual states.
Alabama
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
Alabama Department of Revenue | Destination | No | Yes |
Special tax rules
Alabama uses notice and report laws.
While Alabama is classified as a destination state, it's also defined as a home rule state. This means that some local jurisdictions might have differing tax rules. If you need to collect sales tax in one of these jurisdictions, then you need to register with them to collect and remit taxes.
You don't need to register in all of these jurisdictions, only with those that apply to you. If you're not sure whether you need to register in a particular jurisdiction, then contact US state tax authorities or a local tax professional.
Alaska
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
Alaska Department of Revenue | Destination | Yes | Yes |
Special tax rules
While Alaska has no state sales tax, it's defined as a home rule state. This means that some local jurisdictions might charge a destination-based rate if the seller has nexus in that state. If you need to collect sales tax in one of these jurisdictions, then you need to register with them to collect and remit taxes.
You don't need to register in all of these jurisdictions, only with those that apply to you. If you're not sure whether you need to register in a particular jurisdiction, then contact US state tax authorities or a local tax professional.
Arizona
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
State of Arizona Department of Revenue | Origin | No | Yes |
Special tax rules
If you're out-of-state, selling to customers in Arizona, and have nexus there, then you need to register with the local jurisdictions you're selling into and charge destination taxes.
Arkansas
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
Arkansas Department of Finance and Administration | Destination | Yes | Yes |
California
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
California Department of Tax and Fee Administration | Hybrid | No | Yes |
Special tax rules
California uses a mixture of origin and destination sourcing rules. State, county and city taxes are based on the origin of the purchase (the seller), but district taxes are based on the destination (the buyer).
In California, shipping is not taxable if the actual cost of shipping is listed on a separate line on the invoice. If you add handling fees, then shipping becomes taxable. You can choose whether you want to charge taxes on shipping when you set up your taxes and enter your sales tax ID. If you're not sure whether you should charge taxes on shipping, then leave this option on the default setting and check with US state tax authorities or a local tax professional.
When you enter your tax registration information for California, you can choose whether to charge taxes according to destination rules or hybrid origin rules. The default setting is Destination.
Colorado
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
Colorado Department of Revenue | Destination | Yes | Yes |
Special tax rules
Colorado is separated into districts. If you're a seller in Colorado, then you need to charge state tax as well as any district taxes in your buyer's location.
In Colorado, shipping is not taxable if the actual cost of shipping is listed on a separate line on the invoice. You can choose whether you want to charge taxes on shipping when you set up your taxes and enter your sales tax ID. If you're not sure whether you should charge taxes on shipping, then leave this option on the default setting and check with US state tax authorities or a local tax professional.
Colorado uses notice and report laws.
Connecticut
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
Connecticut State Department of Revenue Services | Destination | Yes | No |
Delaware
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
Delaware Tax Center | Not applicable | No | No |
Special tax rules
Delaware does not charge sales tax.
District of Columbia
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
DC Office of Tax and Revenue | Destination | Yes | No |
Florida
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
Florida Department of Revenue | Destination | Yes | Yes |
Special tax rules
In Florida, shipping is not taxable if the actual cost of shipping is listed on a separate line on the invoice. You can choose whether you want to charge taxes on shipping when you set up your taxes and enter your sales tax ID. If you're not sure whether you should charge taxes on shipping, then leave this option on the default setting and check with US state tax authorities or a local tax professional.
Georgia
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
Georgia Tax Center | Destination | Yes | Yes |
Hawaii
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
State of Hawaii Department of Taxation | Destination | Yes | Yes |
Idaho
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
Idaho State Tax Commission | Destination | No | Yes |
Special tax rules
If you don't have a location in Idaho, but have economic nexus there, then you only charge the state tax at the destination.
Illinois
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
Illinois Department of Revenue | Origin | Yes | Yes |
Special tax rules
Illinois follows origin sourcing rules for sales within the state. For out-of-state sales, destination sourcing applies.
In Illinois, shipping is not taxable if the actual cost of shipping is listed on a separate line on the invoice and there is a choice of means to get the product, such as local pickup. You can choose whether you want to charge taxes on shipping when you set up your taxes and enter your sales tax ID. If you're not sure whether you should charge taxes on shipping, then leave this option on the default setting and check with US state tax authorities or a local tax professional.
Indiana
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
Indiana Department of Revenue | Destination | Yes | No |
Iowa
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
Iowa Department of Revenue | Destination | No | Yes |
Special tax rules
Taxes in Iowa are calculated on a destination basis. If you're located in the state and have nexus there, then you need to charge taxes based on the destination of the buyer. If you're an out-of-state seller, then only the state tax rate applies.
Kansas
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
Kansas Department of Revenue | Destination | Yes | Yes |
Kentucky
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
Kentucky Department of Revenue | Destination | Yes | No |
Special tax rules
Kentucky uses notice and report laws.
Louisiana
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
Louisiana Department of Revenue | Destination | No | Yes |
Special tax rules
Louisiana is generally a destination state, but has some particular rules regarding the state's jurisdictions. Different jurisdictions might have different rules on what counts as nexus based on physical or economic presence. If you're not sure whether you have nexus in a particular jurisdiction, then contact a local tax authority.
In Louisiana, shipping is not taxable if the actual cost of shipping is listed on a separate line on the invoice and there is a choice of means to get the product, such as local pickup. You can choose whether you want to charge taxes on shipping when you set up your taxes and enter your sales tax ID. If you're not sure whether you should charge taxes on shipping, then leave this option on the default setting and check with US state tax authorities or a local tax professional.
Louisiana uses notice and report laws.
Maine
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
Maine Revenue Services | Destination | No | No |
Special tax rules
In Maine, shipping is not taxable if the actual cost of shipping is listed on a separate line on the invoice and there is a choice of means to get the product, such as local pickup. You can choose whether you want to charge taxes on shipping when you set up your taxes and enter your sales tax ID. If you're not sure whether you should charge taxes on shipping, then leave this option on the default setting and check with US state tax authorities or a local tax professional.
Maryland
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
Comptroller of Maryland | Destination | Yes | No |
Special tax rules
In Maryland, shipping is not taxable if the actual cost of shipping is listed on a separate line on the invoice. If you add handling fees, then shipping becomes taxable. You can choose whether you want to charge taxes on shipping when you set up your taxes and enter your sales tax ID. If you're not sure whether you should charge taxes on shipping, then leave this option on the default setting and check with US state tax authorities or a local tax professional.
Massachusetts
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
Massachusetts Department of Revenue | Destination | Yes | No |
Special tax rules
In Massachusetts, clothing products with a price under $175 are exempt from state sales tax, and clothing products with a price of over $175 will collect tax only on the amount that their price is over $175. For example, an item of clothing with a price of $200 will be taxed on $25, because the first $175 is not taxable.
To set up a tax override for clothing items, refer to Tax overrides and exemptions.
Michigan
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
Michigan Department of Treasury | Destination | Yes | No |
Minnesota
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
Minnesota Department of Revenue | Destination | Yes | Yes |
Mississippi
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
Mississippi Department of Revenue | Origin | Yes | Yes |
Missouri
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
Missouri Department of Revenue | Origin | No | Yes |
Special tax rules
Missouri is an origin state for sellers with nexus and a location within the state. If you're selling to customers in the state and have economic nexus, but do not have a location in-state, you're required to charge use tax.
Montana
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
Montana Department of Revenue | Not applicable | No | No |
Special tax rules
Montana does not charge sales tax.
Nebraska
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
Nebraska Department of Revenue | Destination | Yes | Yes |
Nevada
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
State of Nevada Department of Taxation | Destination | No | Yes |
Special tax rules
Shipping is not taxable in Nevada if it's stated as a separate line item. If the prices of your products include shipping or handling, then taxes need to be charged.
New Hampshire
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
New Hampshire Department of Revenue Administration | Not applicable | No | No |
Special tax rules
New Hampshire does not charge sales tax.
New Jersey
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
New Jersey Treasury Division of Taxation | Destination | Yes | No |
New Mexico
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
New Mexico Taxation and Revenue | Origin | Yes | Yes |
New York
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
New York State Department of Taxation and Finance | Destination | Yes | Yes |
Special tax rules
In New York, clothing products, footwear products, and items used to repair clothing products with an individual price under $110 are exempt from state sales tax. For example, two items with a combined price of $200 will each be exempt from sales tax, but one item with an individual price of $110 will be subject to sales tax.
To set up a tax override for these items, refer to Tax overrides and exemptions.
North Carolina
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
North Carolina Department of Revenue | Destination | Yes | Yes |
North Dakota
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
websitename | Destination | Yes | Yes |
Ohio
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
Ohio Department of Taxation | Origin | Yes | Yes |
Special tax rules
Ohio follows origin sourcing. However, if a seller is based outside of Ohio, sells to customers in the state, and has economic nexus in Ohio, then they should charge destination sales tax based on the customer's location.
Oklahoma
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
Oklahoma Tax Commission | Destination | No | Yes |
Special tax rules
Oklahoma uses notice and report laws.
Oregon
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
Oregon Department of Revenue | Not applicable | No | No |
Special tax rules
Oregon does not charge sales tax.
Pennsylvania
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
Pennsylvania Department of Revenue | Origin | Yes | Yes |
Special tax rules
Pennsylvania uses notice and report laws.
Puerto Rico
Tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
Finance Department of Puerto Rico | Destination | No | Yes |
Rhode Island
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
State of Rhode Island Division of Taxation | Destination | Yes | No |
Special tax rules
In Rhode Island, clothing and footwear products with an individual price of $250 or less are exempt from state sales tax, and only the incremental amount above $250 is subject to sales tax. For example, if a suit costs $275, then the tax applies only to $25.
To set up a tax override for these items, refer to Tax overrides and exemptions.
Rhode Island uses notice and report laws.
South Carolina
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
South Carolina Department of Revenue | Destination | Yes | Yes |
South Dakota
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
South Dakota Department of Revenue | Destination | Yes | Yes |
Special tax rules
South Dakota uses notice and report laws.
Tennessee
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
Tennessee Department of Revenue | Origin | Yes | Yes |
Special tax rules
In Tennessee, whether or not shipping is taxable is dependent on whether or not the product itself is taxable. If your product is taxable, then you need to charge tax on shipping. If the product isn't taxable, then you don't need to charge tax on shipping.
Tennessee uses notice and report laws.
Texas
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
Texas Comptroller of Public Accounts | Origin | Yes | Yes |
Special tax rules
Texas is an origin state for sellers that have both a physical presence and economic nexus in the state. If you have nexus in Texas but do not have a physical location there, then Texas is considered a destination state.
Utah
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
Utah State Tax Commission | Origin | No | Yes |
Special tax rules
If you do not have nexus in Utah, your customers in that state are responsible for filing their purchases as a use tax on their income tax. If you want, you can resgister with the state of Utah to collect this tax.
Vermont
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
Vermont Department of Taxes | Destination | Yes | Yes |
Special tax rules
Vermont uses notice and report laws.
Virginia
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
Virginia Tax | Origin | No | Yes |
Special tax rules
Shipping is not taxable in Virginia if it's stated as a separate line item. If the prices of your products include shipping, then taxes need to be charged.
Virginia is considered an origin state, but out-of-state sellers should apply destination rules for determining tax.
Washington
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
Washington State Department of Revenue | Destination | Yes | Yes |
Special tax rules
Washington uses notice and report laws.
West Virginia
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
West Virginia State Tax Department | Destination | Yes | Yes |
Wisconsin
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
State of Wisconsin Department of Revenue | Destination | Yes | Yes |
Special tax rules
In Wisconsin, whether or not shipping is taxable is dependent on whether or not the product itself is taxable. If your product is taxable, then you need to charge tax on shipping. If the product isn't taxable, then you don't need to charge tax on shipping. If the products in an order are a mix of taxable and non-taxable items, then the portion of shipping that applies to the taxable items is taxable.
Wyoming
State tax website | Sourcing | Taxable shipping | Local taxes |
---|---|---|---|
Wyoming Department of Revenue | Destination | No | No |
Special tax rules
Wyoming is a destination state, but doesn't have local taxes. For that reason, buyers always pay the same state level tax rate.