If your ecommerce business sells to customers across the United States, this guide covers everything you need to know about ecommerce sales tax, including foundations, best practices, and basic criteria for all 50 states (plus Washington, DC).
This is your introduction to becoming and remaining tax compliant as your online business grows.
What is ecommerce sales tax?
Ecommerce sales tax is the tax you charge and collect from your online customers. It’s a percentage of the price of the items you sell, and works similarly to the tax you’d charge your customer in a physical store.
It’s also called “online sales tax” or “internet sales tax,” but it’s not a special tax reserved for sales that take place online. We call it ecommerce sales tax because tax laws have been updated to include online shopping scenarios.
This update happened due to the 2018 South Dakota v. Wayfair, Inc. case, which ruled a state may require sellers with no physical presence in the state to collect and remit sales tax for goods sold to customers in that state.
That’s where the concepts of nexus and economic nexus come in.
Nexus is a connection or presence in a state that requires you to track and pay sales tax. Nexus can be established by having a physical presence in the state (e.g., a store or a warehouse) or having employees there. This can be different from state to state.
Economic nexus means if you make a certain amount of sales in a state, you may be required to collect and remit sales tax, even without a physical presence. Find the list of economic nexus laws for each of the 50 states below.
Importance of ecommerce sales tax
Taxes are annoying on a good day and stressful on a bad day, which is why it is important to keep track of what you owe and to whom. You owe it to yourself, your business, and the state to keep track of your tax obligations. Here are some of the main reasons why.
Missing sales tax requirements can have serious consequences
As your business grows, you need to have a sales tax permit for every state with customers you’re selling to. You’ll also have to file sales tax returns, and pay any sales tax you owe.
Miss these steps, and you’ll have to pay past-due sales tax, penalties, and interest that can range from hundreds up to tens of thousands of dollars. In some states, failure to file or pay sales tax can have criminal penalties.
Correct sales tax is good for customer relationships
When you have all your sales taxes organized, you can charge the correct sales tax amount instantly at checkout. If that’s not the case, you may have to ask your customers for additional payments, which can frustrate them and put their trust in you at risk. This makes it harder to retain customers and build up your brand’s reputation. Upfront transparency and a clear tax situation are key.
Sales tax is essential for economic growth
States, counties, and local municipalities use sales tax to raise revenue. The funds are used to develop communities, build roads, improve schools, parks, and libraries, and fund protective services like fire departments.
Sales tax plays an important role in society throughout the United States, and ecommerce businesses make significant contributions to it.
Six ecommerce sales tax best practices
States with economic nexus can be a risk for fast-growing companies. As your online store grows more popular, you’re more likely to get audited, so if you haven’t yet—prioritize sales tax compliance.
Here are some tips and best practices to help you do it well:
1. Determine where you have sales tax nexus and how it works
Sales tax nexus—your obligation to collect sales tax—can be triggered in multiple states based on your business activities. Sales can be taxed in two different ways, known as sourcing:
- Origin-sourced sales are taxed where the seller is located.
- Destination-sourced sales are taxed where the buyer takes possession of the item sold.
While origin-based sourcing is simpler since it only involves tax rates where your business is based, most states use destination-based sourcing. This makes ecommerce sales tax more complex to track.
However, tools like Shopify Tax can help by automatically monitoring your nexus status and alerting you when you're approaching sales tax obligations in new states. This automated tracking helps ensure you stay compliant as your business grows across state lines.
2. Register for a sales tax permit
Once you know what states you have sales tax nexus in, the next step is to register with each state’s tax authority and obtain a sales tax permit or a seller’s permit. Costs of applying for these permits vary from free to $100.
Almost all states allow you to register for your permit online.
Sales tax and seller’s permits have varying expiration dates. For example, permits in Arkansas remain active until you request cancellation, while you have to renew your permit in Colorado every two years.
3. Know your sales tax exemptions
There are items, scenarios, and periods that are exempt from sales tax. As you learn the states where you meet nexus criteria, check each of them for exemptions. Here’s a list to get you started:
- Nonprofit exemptions: Some states allow nonprofit organizations to purchase items free of sales tax if they meet certain criteria and have relevant certificates (see example for Virginia).
- Wholesale and reseller exemptions: Some states provide an exemption when the purchaser isn’t the final consumer, for example a distributor (see example for Colorado).
- Sales tax holidays: Some states have periods when state sales tax is suspended on certain items, like school supplies and clothing during a back-to-school season (see example for New Mexico).
- Product exemptions: Many states don’t collect tax, or collect lower taxes, on essential product categories like groceries (see example for New York).
4. Collect, report, and file your sales tax returns
With your permits and an online store set up to collect sales tax for each required state, you’ll need to report and file your sales tax returns. Reporting requirements vary widely according to which state you’re remitting it to. Frequency of reporting depends on your sales volume.
For example, in the state of North Carolina you’d file quarterly if your monthly tax liability was consistently below $100, and you’d file monthly if your monthly liability was between $100 and $20,000. Enterprise-sized merchants can expect to report and file taxes at least quarterly, and often monthly.
If you didn’t collect sales tax within a particular state in a filing period, you still submit a file. Even if the total is zero, not filing can result in late or non-filing penalties.
Shopify Tax now offers automated filing to handle your returns and payments directly from your admin dashboard. It also offers:
- Flat-fee pricing ($50 per return for merchants on the Plus plan, $75 for others)
- No annual fees or contracts
- Support for all 46 US states with sales tax
- Automatic calculations using rooftop-accurate rates
- Flexible filing schedules (monthly, quarterly, or annually)
Want simpler sales tax handling? Explore Shopify Tax to learn about automated calculations and filing.
5. Create a visible schedule for sales tax returns
Each state defines the frequency at which you need to report and file your sales tax returns, and the day of the month you need to file by. For example, in the state of Missouri, monthly returns are due on the last day of the month, quarterly returns on the last day of the month after the end of the quarter, and annual returns on January 31.
Keep an updated tax year calendar for all states where you need to collect, report, and file taxes to ensure you never miss a due date.
6. Consider automating sales tax bookkeeping and payments
Many companies start by complying with sales tax laws manually, using Department of Revenue notices for one or two states where they know they are required to file.
However, this method doesn’t scale. What took just a few hours a month with one state could take dozens of hours once your business grows and establishes a presence across the country, where there are more than 12,000 tax jurisdictions.
Whether or not you’re ready for it, growth will trigger tax responsibilities, liability, and risks. You can prepare for this by using dedicated software to automate the process of tracking, collecting, reporting, and filing your taxes across the United States.
Shopify merchants can use Shopify Tax to automatically handle their sales tax obligations—from determining economic nexus to registering in required jurisdictions and filing returns. With Shopify Tax, you can streamline tax compliance and confidently focus on growing your business, knowing tax responsibilities are being managed efficiently.
State-by-state economic nexus laws
Here you’ll find the economic nexus thresholds for each of the 50 states, plus Washington, DC.
If you don’t have a physical presence in these states but sell to customers based there, and want to know what triggers sales tax responsibilities, this is the information you need.
States typically refer to ecommerce businesses as remote sellers, out-of-state sellers, out-of-state businesses, or companies doing remote sales.
Note there are types of products and services exempt from sales tax which differ from state to state, so be sure to check if these exemptions apply to your business.
There might be additional legislation in place on top of the economic nexus, so check the links for each state’s tax and revenue resources to make sure you’re aware of all relevant regulations.
Alabama
Alabama’s economic nexus threshold is $250,000 in sales in the previous calendar year. It’s a destination-sourced state.
Alabama doesn’t tax shipping if you use a common carrier, and if shipping is broken out as a separate line item on the invoice.
For more details and information, view Alabama's economic nexus guidance and Alabama's tax resources.
Alaska
Alaska doesn’t have a statewide sales tax, but it’s a home rule state, meaning local jurisdictions like cities or counties can define tax terms and audit businesses.
This means each of the 106 local jurisdictions may charge its own destination-based rate if the merchant has nexus in the state. It’s best to contact local governments directly to determine your sales tax obligations.
Alaska’s economic nexus threshold is $100,000 in sales or 200 transactions in the current or previous calendar year.
Alaska doesn’t tax shipping if shipping is broken out as a separate line item on the invoice.
For more details and information, view Alaska’s economic nexus guidance and Alaska's tax resources.
Arizona
Arizona’s economic nexus threshold is:
- $100,000 in sales in the current or previous calendar
- $150,000 for 2020
- $200,000 for 2019
It is an origin-sourced state and considers a remote seller to be any person or business selling or shipping products into Arizona without a physical presence in the state.
Arizona generally doesn’t tax shipping if shipping is broken out as a separate line item on the invoice.
For more details and information, view Arizona’s economic nexus guidance and Arizona’s tax resources.
Arkansas
Remote sellers have an economic nexus threshold of $100,000 in sales or 200 transactions to Arkansas customers in the current or previous calendar year. It’s a destination-sourced state and taxes shipping.
It considers a remote seller to be any out-of-state seller that has no physical presence in Arkansas.
For more details and information, view Arkansas’s economic nexus guidance and Arkansas’s tax resources.
California
California is a mixed-source state because city, county, and state sales taxes are origin-based, and district sales taxes are destination-based.
The economic nexus threshold is $500,000 in sales in the current or previous calendar year.
California taxes shipping if you combine shipping and handling in a line item, or if you mark up the cost of shipping. It doesn’t tax shipping if you pass the cost of shipping on to the customer and charge it as a separate line.
It is important to note that California considers retailers to have a physical presence in the state if they:
- Maintain inventory or office locations in California
- Have representatives in California for purposes of taking orders, making sales or deliveries, or installing or assembling personal property
- Lease equipment, including a computer server, in California
For more details and information, view California’s economic nexus guidance and California’s tax resources.
Colorado
Colorado’s economic nexus threshold is $100,000 in sales in the current or previous calendar year. It’s a destination-sourced state.
Colorado generally taxes shipping. The exception is when shipping is a separate line item on the invoice and the customer has the option to pick up the item on their own or arrange shipping. When the transaction is exempt from sales tax, so is shipping.
For more details and information, view Colorado’s economic nexus guidance and Colorado’s tax resources.
Connecticut
Connecticut’s economic nexus threshold is $100,000 in sales and 200 transactions in the 12-month period ending on September 30. It’s a destination-sourced state.
Connecticut taxes shipping as long as the items you are shipping are also taxable.
For more details and information, view Connecticut’s economic nexus guidance and Connecticut’s tax resources.
Delaware
Delaware does not have sales tax.
Florida
Florida’s economic nexus threshold is $100,000 in sales in the current or previous calendar year. It’s a destination-sourced state.
Even if you don’t meet the economic nexus, Florida considers a seller to have sales tax obligations if they own, rent, or lease tangible personal property in the state.
Florida generally taxes shipping, whether separately stated on the invoice or included in the item price. The exception is when shipping is a separate line item and the customer has the option to pick up the item on their own or arrange shipping on their own.
For more details and information, view Florida’s economic nexus guidance and Florida’s tax resources.
Georgia
For remote sellers, Georgia’s economic nexus threshold is $100,000 in sales or 200 transactions in the current or previous year. It’s a destination-sourced state.
Georgia generally taxes shipping, except when the sale is exempt from sales tax.
For more details and information, view Georgia’s economic nexus guidance and Georgia’s tax resources.
Hawaii
Hawaii doesn’t have sales tax, but a general excise tax (GET) it applies to all business activities.
Hawaii’s economic nexus threshold is $100,000 in sales or 200 transactions in the current or previous year. It’s a destination-sourced state.
Hawaii taxes shipping, as it applies GET on all business.
For more details and information, view Hawaii’s economic nexus guidance and Hawaii’s tax resources.
Idaho
Idaho is a destination-sourced state with an economic nexus threshold of $100,000 in sales in the current or previous calendar year for remote sellers.
Idaho taxes shipping.
For more details and information, view Idaho’s economic nexus guidance and Idaho’s tax resources.
Illinois
For remote sellers, Illinois’s economic nexus threshold is $100,000 in sales or 200 transactions in the preceding 12-month period. It’s an origin-sourced state if you’re an in-state seller, but a destination-sourced state if you don’t have an Illinois location (e.g., warehouse, fulfillment center) to send your orders from.
Illinois generally taxes shipping. The exception is when shipping is a separate line item on the invoice and the customer has the option to pick up the item on their own or arrange shipping. When all products in a shipment are exempt from sales tax, so is shipping of that order.
For more details and information, view Illinois’s economic nexus guidance and Illinois’s tax resources.
Indiana
Indiana’s economic nexus threshold is $100,000 in sales or 200 transactions in the current or previous calendar year. It’s a destination-sourced state.
Indiana taxes shipping if the company uses private, third-party delivery services. Indiana doesn’t tax shipping when using the United States Postal Service because postage charges through USPS aren’t subject to tax.
For more details and information, view Indiana’s economic nexus guidance and Indiana’s tax resources.
Iowa
Iowa is a destination-sourced state with an economic nexus threshold of $100,000 in sales in the current or previous calendar year for remote sellers.
Iowa doesn’t tax shipping if shipping is broken out as a separate line item on the invoice.
For more details and information, view Iowa’s economic nexus guidance and Iowa’s tax resources.
Kansas
Kansas’s economic nexus threshold is $100,000 in sales in the current or previous calendar year. It’s a destination-sourced state and taxes shipping.
Kansas considers a seller to have sales tax nexus if they are based in the state, but also if they sell at a craft show, trade show, or special event there.
For more details and information, view Kansas’s economic nexus guidance and Kansas’s tax resources.
Kentucky
Kentucky is a destination-sourced state that has an economic nexus threshold of $100,000 in sales or 200 transactions in the current or previous calendar year.
Kentucky taxes shipping, except when the product or service is exempt from sales tax.
For more details and information, view Kentucky’s economic nexus guidance and Kentucky’s tax resources.
Louisiana
Like many states, Louisiana’s economic nexus threshold is $100,000 in sales in the current or previous calendar year. Louisiana has removed the 200 transactions criterion as of August 1, 2023. It’s a destination-sourced state that taxes shipping.
Exceptions may apply to separately contracted shipping (for example, customers pick up their order themselves or arrange a third-party delivery). Louisiana is a home rule state, so additional rules may apply depending on the regional taxes applied.
For more details and information, view Louisiana’s economic nexus guidance and Louisiana’s tax resources.
Maine
Maine’s economic nexus threshold is $100,000 in sales in the current or previous calendar year. It’s a destination-sourced state.
Maine generally doesn’t tax shipping when shipping is broken out into a separate line item on the invoice, and made by a common or contract carrier or the US mail.
For more details and information, view Maine’s economic nexus guidance and Maine’s tax resources.
Maryland
Maryland’s economic nexus threshold is similar to many states, set at $100,000 in sales or 200 transactions in the current or previous calendar year. It’s a destination-sourced state and doesn’t tax shipping if it is broken out as a separate line item on the invoice.
For more details and information, view Maryland’s economic nexus guidance and Maryland’s tax resources.
Massachusetts
Massachusetts is also a destination-sourced state with an economic nexus threshold of $100,000 in sales in the current or previous calendar year. Massachusetts generally doesn’t tax shipping if it is broken out as a separate line item on the invoice, the cost is reasonable, and the delivery occurs after the purchase takes place.
For more details and information, view Massachusetts’s economic nexus guidance and Massachusetts’s tax resources.
Michigan
The economic nexus threshold for Michigan is $100,000 in sales or 200 transactions made by a remote seller in the previous calendar year. It’s a destination-sourced state.
It’s also a member state of the Streamlined Sales Tax Registration System, which allows businesses to register for a sales tax permit with multiple states at once.
Michigan doesn’t tax shipping if shipping is broken out as a separate line item on the invoice, and the seller keeps records that show how the tax was calculated for those transactions. This rule went into effect on April 26, 2023.
For more details and information, view Michigan’s economic nexus guidance and Michigan’s tax resources.
Minnesota
Minnesota’s economic nexus threshold is $100,000 in sales or 200 transactions in the preceding 12-month period. This doesn’t include sales in which the customer is buying an item for resale.
Minnesota is a destination-sourced state that taxes shipping, except when the sale is exempt from sales tax.
For more details and information, view Minnesota’s economic nexus guidance and Minnesota’s tax resources.
Mississippi
Compared to most states, the threshold for economic nexus is significantly higher in Mississippi. Remote sellers are required to remit sales tax when they have $250,000 in sales in the preceding 12-month period. It’s an origin-sourced state.
Mississippi taxes shipping, except when the sale is exempt from sales tax.
For more details and information, view Mississippi’s economic nexus guidance and Mississippi’s tax resources.
Missouri
Missouri’s economic nexus threshold is the common $100,000 in sales in the preceding 12-month period, but is determined at the end of each quarter. It’s an origin-sourced state.
Missouri doesn’t tax shipping if shipping is broken out as a separate line item on the invoice.
For more details and information, view Missouri’s economic nexus guidance and Missouri’s tax resources.
Montana
Montana does not have sales tax.
Nebraska
Nebraska is a destination-sourced state with an economic nexus threshold of $100,000 in sales or 200 transactions in the current or previous calendar year. The state taxes shipping whenever the item purchased is taxable and the charges are paid to the retailer. Exceptions are separately stated charges for US postage on direct mail.
For more details and information, view Nebraska’s economic nexus guidance and Nebraska's tax resources.
Nevada
Nevada’s economic nexus threshold is $100,000 in sales or 200 transactions in the current or previous calendar year. It’s a destination-sourced state.
Nevada doesn’t tax shipping if it is broken out as a separate line item on an invoice and it only includes transportation, shipping, or postage. It taxes shipping when shipping charges include handling, crating, preparing for mailing or delivery, and packaging.
For more details and information, view Nevada’s economic nexus guidance and Nevada’s tax resources.
New Hampshire
New Hampshire does not have sales tax.
New Jersey
Like many neighboring states, New Jersey’s economic nexus threshold is $100,000 in sales or 200 transactions in the current or previous calendar year. It’s a destination-sourced state that taxes shipping, except for when the transaction is exempt from sales tax.
For more details and information, view New Jersey’s economic nexus guidance and New Jersey’s tax resources.
New Mexico
New Mexico doesn’t have sales tax, but a gross receipts tax with an economic nexus threshold of $100,000 in sales of products or services in the previous calendar year. It’s an origin-sourced state that doesn’t tax shipping.
For more details and information, view New Mexico’s economic nexus guidance and New Mexico’s tax resources.
New York
New York has one of the highest economic nexus thresholds for remote retailers. It is set at $500,000 in sales and at least 100 transactions delivered to the state in the previous four quarters.
New York taxes shipping, except when the product is exempt from sales tax. It’s a destination-sourced state.
For more details and information, view New York’s economic nexus guidance and New York’s tax resources.
North Carolina
North Carolina is a destination-sourced state, with an economic nexus threshold of $100,000 in sales or 200 transactions in the current or previous calendar year.
North Carolina taxes shipping, except when the item is exempt from sales tax.
For more details and information, view North Carolina’s economic nexus guidance and North Carolina’s tax resources.
North Dakota
Like most states, North Dakota is a destination-sourced state. It has an economic nexus threshold of $100,000 in sales in the current or previous calendar year, with no minimum number of transactions.
North Dakota taxes shipping, except when the product is exempt from sales tax.
For more details and information, view North Dakota’s economic nexus guidance and North Dakota’s tax resources.
Ohio
Ohio is an origin-sourced state with an economic nexus threshold of $100,000 in sales or 200 transactions in the current or previous calendar year.
Like Michigan, it is also part of the Streamlined Sales Tax Registration System, which allows businesses to sign up for sales use and tax permits from multiple states at once.
Ohio charges tax on shipping, except when the product is exempt from sales tax.
For more details and information, view Ohio’s economic nexus guidance and Ohio’s tax resources.
Oklahoma
The economic nexus threshold for Oklahoma is $100,000 in sales in the previous 12-month period. It’s a destination-sourced state, where you won’t be charged sales tax on shipping if it is broken out as a separate line item on the invoice.
For more details and information, view Oklahoma’s economic nexus guidance and Oklahoma’s tax resources.
Oregon
Oregon does not have sales tax.
Pennsylvania
Pennsylvania is an origin-sourced state, with a tax economic nexus threshold of $100,000 in annual sales for remote sellers.
Like many states, it requires taxes on shipping fees, except when the product sold is exempt from sales tax.
For more details and information, view Pennsylvania’s economic nexus guidance and Pennsylvania’s tax resources.
Rhode Island
Remote sellers to Rhode Island will hit the economic nexus threshold at $100,000 in sales or 200 transactions in the previous calendar year. The destination-sourced state taxes shipping on all items, except those that are exempt from sales tax.
Even if you don’t meet the economic nexus threshold, remote sellers should know online referrals can also trigger the sales tax nexus in Rhode Island.
For more details and information, view Rhode Island’s economic nexus guidance and Rhode Island’s tax resources.
South Carolina
South Carolina is a destination-sourced state, where the economic nexus threshold for remote sellers is $100,000 in sales in the previous or current calendar year. South Carolina taxes shipping, except when the item is exempt from sales tax.
For more details and information, view South Carolina’s economic nexus guidance and South Carolina’s tax resources.
South Dakota
South Dakota’s economic nexus threshold is $100,000 in sales in the previous or current calendar year. It’s a destination-sourced state that taxes shipping, except when the sale is exempt from sales tax.
For more details and information, view South Dakota’s economic nexus guidance and South Dakota’s tax resources.
Tennessee
Tennessee’s economic nexus threshold is $100,000 in sales in the preceding 12-month period. It’s an origin-sourced state.
Tennessee generally taxes shipping, except when the sale is exempt from sales tax.
For more details and up-to-date information, view Tennessee’s economic nexus guidance and Tennessee’s tax resources.
Texas
Like New York, Texas’s economic nexus threshold is set at $500,000 in sales in the preceding 12-month period. It’s an origin-sourced state with local tax regions as well.
With so many local tax regions throughout the state, sellers have the option of using the single local tax rate to help streamline collection and remittance. Texas taxes shipping, except when the product is exempt from sales tax.
For more details and information, view Texas’s economic nexus guidance and Texas’s tax resources.
Utah
Remote sellers will hit the economic nexus threshold in Utah after $100,000 in sales or 200 transactions in the current or previous calendar year.
It’s an origin-sourced state that doesn’t tax shipping as long as it is broken out as a separate line item on the invoice.
For more details and information, view Utah’s economic nexus guidance and Utah’s tax resources.
Vermont
Vermont’s economic nexus threshold is $100,000 in sales or 200 transactions in the preceding 12-month period. It’s a destination-sourced state.
Vermont taxes shipping, except when the sale is exempt from sales tax. If the items sold by your business are exempt from sales tax in Vermont, you don’t need to register a sales tax account with the state no matter how much you sell.
For more details and information, view Vermont’s economic nexus guidance and Vermont’s tax resources.
Virginia
Virginia’s economic nexus threshold is $100,000 in annual sales or 200 transactions. It’s an origin-sourced state.
Virginia generally doesn’t tax shipping if shipping is broken out as a separate line item on the invoice. Handling and shipping charges are taxed if they aren’t separately stated on the invoice, or are combined with other fees.
For more details and information, view Virginia’s economic nexus guidance and Virginia’s tax resources.
Washington
Washington’s economic nexus threshold is $100,000 in sales in the current or previous calendar year. It’s a destination-sourced state, and remote sellers can apply for a business license through the Streamlined Sales Tax Registration System.
Washington taxes shipping, except when the item is exempt from sales tax, like food, food ingredients and prescription drugs.
For more details and information, view Washington’s economic nexus guidance and Washington’s tax resources.
Washington, DC
Washington, DC’s economic nexus threshold is $100,000 in sales or 200 transactions in the current or previous calendar year. That threshold includes sales made on the remote seller’s website and those made through a marketplace.
Washington, DC, generally taxes shipping and handling if included as a single item, but separately stated shipping or delivery charges are generally exempt.
For more details and information, view Washington, DC’s economic nexus guidance and Washington, DC’s tax resources.
West Virginia
West Virginia’s economic nexus threshold is $100,000 in annual sales or 200 transactions. Remote sellers who don’t meet this amount are still required to have a business license in the state. West Virginia is a destination-sourced state, with local sales taxes in many regions
The state taxes shipping, except when the sale is exempt from sales tax.
For more details and information, view West Virginia’s economic nexus guidance and West Virginia’s tax resources.
Wisconsin
Wisconsin’s economic nexus threshold is $100,000 in annual sales for remote sellers.
There’s no sales tax on shipping items that are exempt, but shipping on all other items is taxable.
For more details and information, view Wisconsin’s economic nexus guidance and Wisconsin’s tax resources.
Wyoming
The economic nexus threshold in Wyoming is $100,000 in sales or 200 transactions in the current or previous calendar year. It’s a destination-sourced state that requires remote sellers to apply for a business license in order to sell to customers there. The license never expires, so you can continue selling as long as you are in business
Wyoming doesn’t tax shipping if shipping is broken out as a separate line item on the invoice.
For more details and information, view Wyoming’s economic nexus guidance and Wyoming's tax resources.
International sales tax for ecommerce
Value-dded tax (VAT)
Unlike US sales tax, which is only charged at the final sale, value-added tax (VAT) is charged at every stage of production and distribution. Each business in the supply chain:
- Pays VAT when they buy materials or products
- Charges VAT when they sell their products
- Reports the difference to the government
For example, if you sell a t-shirt in the UK:
- You buy it from your supplier for £10 + £2 VAT (20%)
- You sell it to your customer for £20 + £4 VAT (20%)
- You keep the £10 profit, send £2 VAT to the government (£4 collected minus £2 paid)
VAT rates vary by region. Each country set its own rate.
- European Union (EU): Rates range between 17% to 27%.
- United Kingdom: 20%
- Australia: Flat rate of 10% (called goods and services tax)
You’ll need to register for VAT when you reach a country’s sales threshold or keep inventory in a VAT-charging country.
Cross-border tax considerations
When your products cross borders, they're subject to import duties. These are taxes charged by a country to protect local businesses and generate revenue. The amount varies based on:
- Product type and classification
- Country of origin
- Declared value
- Trade agreements between countries
For example, sending a leather handbag from the US to France might trigger different duties than sending the same bag to Japan, even if the sale price is identical.
Every country has a de minimis threshold, a minimum value below which they don't charge import duties. Here are some examples:
- EU: €150
- UK: £135
- Canada: CAD 20
- Australia: AUD 1,000
Orders below these values often clear customs faster and cost less to process.
Understanding these considerations helps you avoid costly mistakes and keeps your international customers coming back. While it might seem complex at first, the right tools and partners can help automate much of this process. Shopify’s Managed Markets helps here.
Managed Markets automatically handles the complex math of international selling. It calculates VAT rates, import duties, and currency conversions in real time, showing your customers exactly what they'll pay—with no surprise fees at delivery.
The tool monitors your sales volumes in different countries and alerts you when you're approaching tax registration thresholds, helping you stay compliant with local laws. For each sale, it generates the right customs forms and tax documentation, saving you hours of paperwork. Plus, it manages currency conversions and displays prices in local currencies, making your store feel local to customers worldwide.
International marketplace obligations
When you sell internationally through online marketplaces like Amazon, eBay, or Alibaba, you face unique tax obligations. These vary by marketplace and country, but understanding them is important for compliance.
Many countries now require online marketplaces to handle tax collection and remittance for online sellers. However, these laws differ across regions:
European Union
- Marketplaces must collect and remit VAT on sales under €150.
- The marketplace is considered the "deemed supplier" for tax purposes.
- Sellers must still track sales for their own VAT obligations.
- Special One Stop Shop (OSS) rules apply for marketplace sales.
United Kingdom
- Marketplaces handle VAT for overseas sellers.
- Different rules apply for goods stored in UK warehouses.
- Sellers need to maintain their own VAT records.
- There are special requirements for goods over £135.
Australia and New Zealand
- Marketplaces must collect GST on low-value goods.
- Platform-specific rules exist for different types of products.
- Digital products have separate obligations.
- Marketplace providers handle tax collection.
Tax registration requirements by region
Whatever region you're entering, start the registration process early. These applications can take weeks or even months to process, and you don't want to hit a sales threshold before you're properly registered.
Here are the requirements by region:
European Union (EU)
- Distance selling threshold: €10,000 across all EU countries
- Once exceeded, register through One Stop Shop (OSS) system
United Kingdom
- Sales exceed £85,000 in any 12-month period
- Storing inventory in UK warehouses
- Selling goods worth over £135 directly to UK consumers
Australia
- Register for GST at AUD 75,000 threshold
- Australian Business Number (ABN) required
Japan
- Registration required at ¥10 million threshold
- Local tax representative often needed
China
- Registration required from first sale
- Different requirements by province
- Local representative mandatory
Canada
- CAD 30,000 threshold for GST/HST
- Province-specific requirements for PST
- Different rules for nonresident sellers
UAE and Saudi Arabia
- VAT registration at specific thresholds
- Mandatory tax representative
- Special documentation requirements
💡 Tip: International tax requirements change frequently, and it's essential to verify current rules when entering new markets. Consider working with local tax professionals for complex registrations.
Make sales taxes easier with Shopify
Tax registration is just the beginning. Each region requires regular filing schedules, specific record-keeping practices, and maintenance of a clear audit trail.
For US sellers, Shopify Tax simplifies domestic tax management with automated calculations, liability tracking, and streamlined filing. It helps you:
- Track tax obligations and monitor your thresholds across states
- Calculate rates with rooftop-level precision for 11,000+ US tax jurisdictions
- Categorize products correctly to apply the right tax rates
- Automate tax filing and remittance with no annual fees
While international selling comes with its own tax complexities, starting with solid domestic tax compliance through Shopify Tax creates a strong foundation for global expansion. Combined with Managed Markets for international selling, you'll have the tools you need to handle tax compliance confidently, whether you're selling across state lines or across oceans.
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Ecommerce sales tax FAQ
What is ecommerce sales tax?
Ecommerce sales tax is a consumption tax paid to the government on the sales of goods and services. It’s typically paid by the end customer of a product at the point of sale, collected by the seller, and remitted to the government on a regular basis, depending on the seller’s volume, products, and state requirements.
Who has the highest sales tax?
California has the highest sales tax rate, at 7.25%. It’s followed closely by Indiana, Mississippi, Rhode Island, and Tennessee, which have a sales tax rate of 7%.
Who needs to pay US sales tax?
In the United States, sales tax is triggered when a customer makes a retail purchase. Customers are responsible for paying US sales tax, but sellers are responsible for collecting and filing correct taxes to the relevant state or local jurisdiction.
How do I set up sales tax for ecommerce?
To set up your ecommerce sales tax, you need to:
- Determine the states where you meet nexus criteria and how sales tax works in those states.
- Register for a sales tax permit or a seller’s permit in relevant states.
- Set up a system to calculate and collect taxes on the right transactions in your online store.
- Report and file taxes based on a schedule determined by each state based on criteria like your sales volume.
How does online shopping calculate sales tax?
States can use destination-based or origin-based sourcing for tax collection. Destination-based means sales are taxed based on the rate of the buyer’s location, and origin-based means sales are taxed based on where the seller is located.
The majority of states use destination-based sourcing.