If your business sells taxable goods or services, whether through a physical presence, online, or both, and has a tax obligation in the state, you are required to collect and remit sales tax. Understanding your tax requirements can be challenging because the sales tax rates vary by state and local jurisdictions. However, it is essential to adhere to sales tax laws to stay compliant and help avoid a tax audit.
For a better understanding of sales tax for businesses, take a look at this informative article on the Huddle Business Capital blog. It explains what sales tax is, discusses the different types of sales tax systems, and provides examples of taxable goods and services.
We are all familiar with sales tax because we see it on receipts after making purchases. Sales tax is a simple concept—it is a tax imposed by state and local governments on the sale of taxable goods and services. When a consumer buys a taxable item or service, a tax is calculated as a percentage of the purchase price and added to the overall cost.
The retailer collects the sales tax and then remits it to the government. The revenue generated from sales tax is used to fund various public services, including education, infrastructure, and public safety (police and firefighters).
Sales tax rates can vary widely depending on the jurisdiction, including state, county, and city levels. As of 2026, 45 states require businesses to remit sales tax. Oregon, Montana, Delaware, New Hampshire, and Alaska are the five states that don't impose sales tax.1 Although Alaska does not have a state sales tax, local municipalities within the state are permitted to levy their own sales taxes. You can find the correct sales tax rate for your state, county, or zip code by contacting your state's Department of Revenue or by consulting an accountant.
Sales tax nexus refers to the connection between a business and a state that requires the business to collect and remit sales tax in that state. The two main types of sales tax nexus are physical and economic. A business with a physical presence, such as a brick-and-mortar retail store, restaurant, warehouse, or storage facility, will have a physical nexus.
Economic nexus happens when a business makes a certain amount of sales—or a certain transaction count—in a state, even if it doesn’t have a physical presence there. Online businesses and remote companies are subject to economic nexus, which was enacted in 2018 to ensure these entities pay taxes in states where they make sales.2
The other types of sales tax nexus are affiliate and click-through. Affiliate sales tax nexus occurs when a business located in one state is connected to a business in another state. For example, if a supermarket has its headquarters in Arizona and operates a subsidiary supermarket in New Mexico, this situation constitutes an affiliate nexus.
A click-through nexus describes a situation where an out-of-state person, such as a blogger, social media influencer, or paid marketing specialist, helps a business by posting content featuring tracking links in exchange for compensation.
Reach out to your state's Department of Revenue or consult an accountant to inquire about nexus laws, their thresholds, and how they apply to your business.
There is no all-encompassing list of taxable products and services. The states that impose sales tax on certain products and services can dictate what is and what isn't taxable. That said, the majority of states classify necessities such as groceries, feminine hygiene products, health care services, and prescription medications as tax-free or tax them at lower rates.
Some states impose sales tax on certain services, such as manufacturing, printing, landscaping, car washing and detailing, automotive repair, telephone answering, and pest extermination. Since each state and jurisdiction has its own specific tax regulations, it is advisable to contact your state's Department of Revenue or consult with an accountant for guidance.
If your business sells products online, whether through your own company website or on a marketplace platform such as eBay, it’s important to familiarize yourself with the specific sales tax laws that apply to your situation. Sales transactions for taxable products on your website require you to collect and remit sales tax to the states in which your customers live.
If your website is built on an e-commerce platform that has tax collection capabilities either built-in or available as an add-on, this will streamline the process. If your platform doesn't have this feature, you'll need to have your website programmer or IT manager install tax collection and remittance software on your site.
Finally, if your business sells products on a marketplace like eBay, eBay collects and remits sales tax for every transaction made through its platform. This saves time and simplifies sales tax management and business accounting.
1. https://taxfoundation.org/data/all/state/2026-sales-tax-rates-midyear/
2. https://tnpa.org/get-involved/wayfair/
This Huddle Business Capital blog article is purely educational and contains general information and opinions; it is not intended to provide advice or recommendations of any kind. Huddle Business Capital is not affiliated with nor endorses the companies mentioned in this article.