Sales Tax and When It Needs to Be Collected by Businesses
Understanding sales tax collection is essential for any business selling goods or services across state lines or online. Failing to comply with state sales tax laws can lead to significant penalties, audits, and reputational damage. At America’s Tax Defender, we provide legal help with sales tax to businesses of all sizes, helping you stay compliant and minimize risk.
In this article, we’ll walk you through when businesses must collect sales tax, how sales tax nexus is established, which goods and services are taxable, and how to avoid common compliance mistakes.
What Is Sales Tax?
Sales tax is a state-imposed tax that applies to the sale of taxable goods and services. It is collected by the business at the point of sale and then remitted to the appropriate state or local tax agency. While customers pay the tax, the business acts as a collector on behalf of the government.
Most U.S. states impose some form of sales tax on transactions, though five states—Delaware, Oregon, Montana, New Hampshire, and Alaska—do not have a statewide sales tax requirement. However, local municipalities in some of these states may still impose local taxes. Knowing your obligations is critical, especially if your business operates in multiple jurisdictions or sells online.
When Do Businesses Collect Sales Tax?
There are two primary conditions that determine whether a business must collect sales tax:
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Establishing a sales tax nexus
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Selling taxable goods or services
1. Sales Tax Nexus Explained
A sales tax nexus is the legal connection between a business and a state that creates the obligation to collect and remit sales tax. There are several ways a nexus can be established:
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Physical Nexus: This includes having a storefront, office, warehouse, inventory, or employees in a state.
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Economic Nexus: After the landmark 2018 South Dakota v. Wayfair decision, states can require businesses to collect sales tax even without a physical presence if their sales or transactions exceed certain thresholds—commonly $100,000 in revenue or 200 transactions annually.
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Affiliate Nexus: This is created through relationships with affiliates in a state who help generate sales.
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Click-Through Nexus: A business may trigger nexus by working with third-party marketers who refer traffic and generate qualifying revenue in a state.
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Marketplace Facilitator Laws: States may require platforms like Amazon, Etsy, or eBay to collect and remit sales tax on behalf of sellers. However, sellers must still understand their obligations outside of those platforms.
If you’re asking, “Do I need to collect sales tax in other states?”, evaluating your nexus footprint is the first step. Our team at America’s Tax Defender helps businesses assess and manage their multi-state sales tax exposure.
2. Selling Taxable Goods or Services
Once nexus is established, you must determine whether your offerings are subject to sales tax. While this varies by state, here are general rules:
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Tangible Personal Property: Most physical goods—like clothing, electronics, and furniture—are taxable unless specifically exempted (e.g., groceries, prescription drugs).
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Digital Goods: States increasingly tax digital products such as downloadable software, streaming subscriptions, eBooks, and SaaS platforms.
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Services: Although traditionally exempt, many states now tax services like landscaping, web design, or digital marketing.
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Shipping and Handling: In some states, you must collect sales tax on delivery charges if the shipped items are taxable.
A sales tax attorney can help you identify which of your products or services are taxable based on your sales footprint.
Examples of When Sales Tax Must Be Collected
Here are real-world examples where sales tax collection is required:
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A Tampa, FL-based e-commerce company begins selling to customers in California. After surpassing the $100,000 revenue threshold, the company now has economic nexus and must register to collect California sales tax.
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A marketing agency based in Georgia provides digital services to clients in Texas, where digital services are taxable. If the agency has remote employees or exceeds the state’s economic nexus threshold, sales tax compliance is required.
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A seller on Amazon benefits from marketplace facilitator laws, where Amazon collects sales tax on their behalf in many states—but the seller must still monitor direct sales made through their website or other platforms.
At America’s Tax Defender, we assist businesses in understanding whether they meet economic nexus sales tax thresholds and how to register and collect state sales tax efficiently.
How to Register and Comply with Sales Tax Laws
Once you determine you must collect sales tax, here’s how to stay compliant:
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Register with Each State: Obtain a sales tax permit (also known as a seller’s permit) in each state where you have nexus.
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Calculate Sales Tax Accurately: Use point-of-sale or e-commerce systems that apply the correct rate based on the buyer’s location.
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File Sales Tax Returns: States require monthly, quarterly, or annual filings depending on your volume. Use a sales tax automation tool to stay on schedule.
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Remit Tax Collected: Send the tax collected to the correct state or local agency.
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Keep Records: Maintain detailed records of transactions, exemption certificates, and tax filings to protect your business during a sales tax audit.
Sales Tax Exemptions and Resale Certificates
Some transactions are exempt from sales tax collection, including:
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Sales to government entities
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Sales to nonprofit organizations
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Sales for resale (wholesale transactions)
When selling to a tax-exempt buyer, it’s essential to obtain a valid resale certificate or exemption certificate and store it properly. Mismanaging exemption documentation can lead to audit penalties, even if the sale was legitimately exempt.
Need help evaluating exemption rules or certificate management? Our sales tax lawyers can advise you on best practices.
Sales Tax and Multi-State Businesses
If your business sells in multiple states or operates online, you likely have multi-state sales tax obligations. Each state’s rules on nexus, taxable products, and filing requirements are unique. For example:
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Florida requires businesses with economic nexus or physical presence to collect Florida sales tax on taxable sales.
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Texas taxes many services, including digital products and hosting.
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California has complex rules for marketplace facilitators and remote sellers.
Keeping up with these changes manually can be overwhelming. That’s why many businesses use tools like Avalara, TaxJar, or Stripe Tax to automate rate calculation, track nexus exposure, and manage filings. Still, automation tools are not a substitute for legal guidance, especially in cases of sales tax audits or disputes.
When to Contact a Sales Tax Attorney
There are many scenarios where hiring a sales tax attorney is the smart choice:
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You’re launching or expanding an online store
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You receive a sales tax nexus questionnaire
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You need help registering in multiple states
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You’re audited or penalized for non-collection of sales tax
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You want to contest sales tax liability or negotiate a settlement
At America’s Tax Defender, we provide sales tax legal advice tailored to your business. We’ll assess your exposure, advise on registration requirements, and represent you in disputes or audits.
Trends Affecting Sales Tax Compliance
Sales tax rules continue to evolve, and staying up to date is essential for avoiding penalties. Current trends include:
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States expanding economic nexus rules and lowering thresholds
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More states taxing digital goods and SaaS
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New marketplace facilitator laws affecting third-party sellers
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Remote work triggering unexpected nexus in employees’ states
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Increased scrutiny from state sales tax audits
We help clients stay proactive by monitoring these changes and developing tax compliance strategies that minimize risk and support business growth.
Don’t Overlook Sales Tax Compliance
Collecting sales tax isn’t just an accounting task—it’s a legal obligation. With the rise of e-commerce and remote sales, businesses must be more diligent than ever. Whether you’re just getting started or expanding to new states, your business can’t afford to ignore sales tax obligations.
If you’re asking yourself, “Do I need to collect sales tax in Florida or other states?”, it’s time to get expert support.
Get Help from America’s Tax Defender
At America’s Tax Defender, our experienced sales tax lawyers help businesses across the U.S. understand their obligations, reduce compliance burdens, and fight back when disputes arise. From sales tax registration to audit defense, we’re your trusted legal partner in all things state tax compliance.
Located in Tampa, Florida, we serve clients nationwide. Schedule a free consultation today to ensure your business is collecting and remitting sales tax correctly—before a state auditor comes calling.
