If you run a small business or an e-commerce store (like Shopify or Amazon FBA), navigating the labyrinth of US sales tax is your biggest compliance nightmare. With over 10,000 different tax jurisdictions in the United States, charging the correct amount is crucial.

If you ever need to manually figure out the tax on an invoice, you can instantly run the math with our Sales Tax / GST Calculator.

Economic Nexus: The Wayfair Ruling

Before 2018, online businesses only had to collect sales tax if they had a "physical presence" (a warehouse or office) in that state.

But the Supreme Court case South Dakota v. Wayfair changed the law. Now, states can enforce an "Economic Nexus." This means if you sell a certain amount of goods into a state (usually $100,000 in revenue or 200 separate transactions), you must register and collect sales tax for that state, even if your business is located 3,000 miles away!

Resale Certificates

If you are buying raw materials to manufacture a product, you should not be paying sales tax on those materials. You need to provide your vendor with a Resale Certificate. When you sell the final finished product to the end consumer, they pay the sales tax.

Tracking all these business expenses is vital, because everything you buy for the business lowers your final taxable income. Make sure to project your overall personal and business tax burden using our Income Tax Calculator.

Final Takeaway

Never guess when it comes to state revenue departments. Automate your sales tax collection where possible, and for one-off invoices, always double-check the local rates using our Sales Tax / GST Calculator. Furthermore, if you are looking to expand your business with funding, be sure to calculate the cost of debt using our Loan Calculator.