Smart Bookkeeping for Smart Sellers
Calculate sales tax by state for your eCommerce business
Enter the pre-tax sale amount
State-level sales tax rate (local taxes may apply)
Additional county or city sales tax
Use this if you know the exact combined rate
Sales tax is a consumption tax imposed by state and local governments on the sale of goods and services. For eCommerce businesses, understanding and correctly collecting sales tax is crucial for compliance and avoiding penalties. As of 2025, sales tax rates vary significantly across the United States, ranging from 0% in states like Delaware and Oregon to over 16% when combining state and local rates in California.
Important 2025 Update: Louisiana increased its state sales tax rate from 4.45% to 5.00% and now taxes digital products including audiovisual works, ebooks, and applications. Illinois now requires out-of-state sellers to use destination-based sourcing for shipments into the state.
Sales Tax = Sale Amount × Tax Rate
To calculate sales tax, multiply the pre-tax sale amount by the applicable tax rate. For example, if you sell a $100 item in California with a 7.25% state rate, the sales tax is $7.25, making the total $107.25. However, local jurisdictions often add their own taxes, so the combined rate can be much higher.
The 2018 Supreme Court decision in South Dakota v. Wayfair, Inc. fundamentally changed sales tax for eCommerce businesses. Previously, only businesses with a physical presence in a state needed to collect sales tax. Now, states can require sales tax collection based on economic activity alone.
You have physical nexus when you maintain a store, office, warehouse, inventory, or employees in a state. Physical presence creates an obligation to collect sales tax.
Economic nexus is established when you exceed a state's sales threshold, typically $100,000 in annual revenue or 200 transactions per year.
If you sell through Amazon, eBay, or other marketplaces, the platform may collect and remit sales tax on your behalf in many states.
Having affiliates, sales representatives, or related companies in a state may create nexus requiring sales tax collection.
| State | State Rate | Local Range | Combined Max |
|---|---|---|---|
| California | 7.25% | 0% – 9.5% | 16.75% |
| Tennessee | 7.00% | 0% – 3% | 10.00% |
| Arkansas | 6.50% | 0% – 6.125% | 12.625% |
| Illinois | 6.25% | 0% – 4.75% | 11.00% |
| Texas | 6.25% | 0.125% – 2% | 8.25% |
| Florida | 6.00% | 0% – 2% | 8.00% |
| New York | 4.00% | 0% – 4.875% | 8.875% |
| Colorado | 2.90% | 0% – 8.3% | 11.20% |
| Louisiana | 5.00% | 0% – 7% | 12.00% |
| Delaware | 0.00% | N/A | 0.00% |
| Montana | 0.00% | N/A | 0.00% |
| New Hampshire | 0.00% | N/A | 0.00% |
| Oregon | 0.00% | N/A | 0.00% |
Register for sales tax permits: Once you determine nexus in a state, register for a sales tax permit with that state's tax authority. Registration is typically free but required before collecting sales tax.
Collect the correct rate: Use origin-based or destination-based sourcing depending on the state. Most states use destination-based sourcing, meaning you charge the tax rate where the customer is located, not where you're shipping from.
File returns on schedule: States require sales tax returns monthly, quarterly, or annually depending on your sales volume. File even if you collected zero tax during the period to maintain good standing.
Remit tax payments on time: Submit collected sales tax by the filing deadline. Late payments accrue interest and penalties that can significantly impact your business finances.
Not monitoring nexus thresholds: Many sellers only track sales in their home state, missing economic nexus triggers in other states. Use accounting software that monitors sales by state and alerts you when approaching thresholds.
Using outdated tax rates: Tax rates change regularly. California alone has hundreds of local jurisdictions with different rates. Rely on automated tax calculation software that updates rates in real-time.
Assuming marketplaces handle everything: While Amazon and other platforms collect tax in many states, you may still have obligations for direct sales, other platforms, or states where the marketplace doesn't collect on your behalf.
Forgetting product exemptions: Many states exempt groceries, clothing, or prescription medications from sales tax. Incorrectly charging tax on exempt items can lead to customer complaints and compliance issues.
For eCommerce businesses selling across multiple states, manual sales tax compliance becomes nearly impossible. Consider using automated solutions like Avalara, TaxJar, or Vertex that integrate with your shopping cart, calculate rates by ZIP code, file returns, and remit payments automatically. While these services charge fees, they save significant time and reduce audit risk.