Sales Tax Threshold Guide — United States
Unlike most countries, the United States does not have a federal VAT or GST. Sales tax in the US is set and collected by individual states and local jurisdictions, each with their own rates and rules.
There is no federal sales tax in the US. Sales tax is state-specific. If you sell goods or services across state lines, you may have sales tax 'nexus' obligations. Consult a CPA for state sales tax compliance.
Post-Wayfair Economic Nexus — South Dakota v. Wayfair (2018)
Following the Supreme Court's decision in South Dakota v. Wayfair, states may require out-of-state sellers to collect and remit sales tax based on economic nexus — even without a physical presence in the state.
- Revenue threshold: $100,000 in sales per state per year
- Transaction threshold: 200 separate transactions per state per year
- Note: Thresholds vary by state — some states apply only one test, others apply both.
Key Facts for Self-Employed Individuals
- Services vs goods: Many states exempt professional services from sales tax. Physical goods are generally taxable.
- Digital products: Tax treatment of software, subscriptions, and digital downloads varies by state.
- Physical nexus: Having an office, employees, or inventory in a state triggers collection obligations.
- Multi-state obligations: If you sell across state lines above these thresholds, you may need to register and collect sales tax in each state separately.
- CPA guidance recommended: US state sales tax compliance is complex. Consult a CPA or sales tax specialist for your specific situation.