US taxes reference

This page was printed on Mar 02, 2021. For the current version, visit https://help.shopify.com/en/manual/taxes/us/us-tax-reference?utm_campaign=Guru+Ask&utm_medium=Forum&utm_source=Social.

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:

List of notice and report states
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.

List of states
Alabama	Alaska	Arizona	Arkansas	California
Colorado	Connecticut	Delaware	District of Columbia	Florida
Georgia	Hawaii	Idaho	Illinois	Indiana
Iowa	Kansas	Kentucky	Louisiana	Maine
Maryland	Massachusetts	Michigan	Minnesota	Mississippi
Missouri	Montana	Nebraska	Nevada	New Hampshire
New Jersey	New Mexico	New York	North Carolina	North Dakota
Ohio	Oklahoma	Oregon	Pennsylvania	Puerto Rico
Rhode Island	South Carolina	South Dakota	Tennessee	Texas
Utah	Vermont	Virginia	Washington	West Virginia
Wisconsin	Wyoming

Alabama

Tax information for 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

Tax information for 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.

Arizona

Tax information for 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

Tax information for Arkansas.
State tax website	Sourcing	Taxable shipping	Local taxes
Arkansas Department of Finance and Administration	Destination	Yes	Yes

California

Tax information for 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

Tax information for 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

Tax information for Connecticut.
State tax website	Sourcing	Taxable shipping	Local taxes
Connecticut State Department of Revenue Services	Destination	Yes	No

Delaware

Tax information for 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

Tax information for the District of Columbia.
State tax website	Sourcing	Taxable shipping	Local taxes
DC Office of Tax and Revenue	Destination	Yes	No

Florida

Tax information for 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

Tax information for Georgia.
State tax website	Sourcing	Taxable shipping	Local taxes
Georgia Tax Center	Destination	Yes	Yes

Hawaii

Tax information for Hawaii.
State tax website	Sourcing	Taxable shipping	Local taxes
State of Hawaii Department of Taxation	Destination	Yes	Yes

Idaho

Tax information for 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

Tax information for 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

Tax information for Indiana.
State tax website	Sourcing	Taxable shipping	Local taxes
Indiana Department of Revenue	Destination	Yes	No

Iowa

Tax information for 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

Tax information for Kansas.
State tax website	Sourcing	Taxable shipping	Local taxes
Kansas Department of Revenue	Destination	Yes	Yes

Kentucky

Tax information for 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

Tax information for 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

Tax information for 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

Tax information for 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

Tax information for 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

Tax information for Michigan.
State tax website	Sourcing	Taxable shipping	Local taxes
Michigan Department of Treasury	Destination	Yes	No

Minnesota

Tax information for Minnesota.
State tax website	Sourcing	Taxable shipping	Local taxes
Minnesota Department of Revenue	Destination	Yes	Yes

Mississippi

Tax information for Mississippi.
State tax website	Sourcing	Taxable shipping	Local taxes
Mississippi Department of Revenue	Origin	Yes	Yes

Missouri

Tax information for 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

Tax information for 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

Tax information for Nebraska.
State tax website	Sourcing	Taxable shipping	Local taxes
Nebraska Department of Revenue	Destination	Yes	Yes

Nevada

Tax information for 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

Tax information for 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

Tax information for New Jersey.
State tax website	Sourcing	Taxable shipping	Local taxes
New Jersey Treasury Division of Taxation	Destination	Yes	No

New Mexico

Tax information for New Mexico.
State tax website	Sourcing	Taxable shipping	Local taxes
New Mexico Taxation and Revenue	Origin	Yes	Yes

New York

Tax information for 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

Tax information for North Carolina.
State tax website	Sourcing	Taxable shipping	Local taxes
North Carolina Department of Revenue	Destination	Yes	Yes

North Dakota

Tax information for North Dakota.
State tax website	Sourcing	Taxable shipping	Local taxes
websitename	Destination	Yes	Yes

Ohio

Tax information for 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

Tax information for 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

Tax information for 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

Tax information for 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 information for Puerto Rico.
Tax website	Sourcing	Taxable shipping	Local taxes
Finance Department of Puerto Rico	Destination	No	Yes

Rhode Island

Tax information for 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

Tax information for South Carolina.
State tax website	Sourcing	Taxable shipping	Local taxes
South Carolina Department of Revenue	Destination	Yes	Yes

South Dakota

Tax information for 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

Tax information for 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

Tax information for 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

Tax information for 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 register with the state of Utah to collect this tax.

Vermont

Tax information for 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

Tax information for 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

Tax information for 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

Tax information for West Virginia.
State tax website	Sourcing	Taxable shipping	Local taxes
West Virginia State Tax Department	Destination	Yes	Yes

Wisconsin

Tax information for 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

Tax information for 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.