Sales Tax Basics for E-Commerce Businesses: What You Need to Know

TLDR: Sales tax in the U.S. is managed by states, not the federal government. If your business hits Nexus in a state, based on sales volume or transaction count, you’re required to collect and remit sales tax. Marketplace platforms like Amazon handle it for you, but if you sell on your own site (e.g., Shopify), you’re responsible. Rates vary by location, and filings can get complicated. doola helps automate the entire process so you can stay compliant and focus on growth.

What Is Sales Tax and Who Collects It?

Sales tax is a government-imposed tax on the sale of goods and services. It’s usually a percentage of the purchase price and is paid by the buyer at the point of sale. The seller then collects the tax and sends it to the appropriate tax authority (like a state or local government).

In the United States, sales tax is not collected by the federal government, it’s managed at the state level. Today, 46 states impose a sales tax to help fund public infrastructure like roads, schools, and hospitals.

Unlike value-added tax (VAT), sales tax is typically not included in the listed price of an item. Instead, it’s calculated at the time of purchase and added to the final total.

Example:

If you buy a $10 item in a state with 5% sales tax, you’ll pay $0.50 in tax, making the total $10.50.

Sales Tax Rules Vary by State

Each state sets its own rules about what goods and services are taxable. Some exempt groceries or other essentials, while others require tax on nearly all transactions.

This gets more complex when you’re selling online.

Sales Tax for E-Commerce: What Founders Need to Know

E-commerce sellers are responsible for collecting and remitting sales tax when they reach something called Nexus in a state. Nexus refers to a sufficient business presence that triggers a tax obligation.

Common Nexus Thresholds:

• $100,000 in annual sales
• 200 transactions per year
• Some states have thresholds as high as $500,000

Once you reach Nexus, you need to apply for a sales tax permit and begin collecting tax from customers in that state.

Marketplace Facilitator Laws: Who’s Responsible?

Most states now have Marketplace Facilitator Laws, which shift the responsibility for collecting and remitting sales tax to platforms like Amazon and eBay. If you sell exclusively through those platforms, sales tax may already be handled for you.

But if you sell through your own website, via Shopify, WooCommerce, or a custom storefront—you’re on the hook for compliance. Founders using multiple channels must track which platforms collect tax automatically and which don’t.

Local Sales Tax: It’s Not Just the State Rate

In addition to state sales tax, many cities and counties add local taxes on top. That means the sales tax rate can vary street by street.

Most states require businesses to file detailed reports that break down sales by:

• City
• County
• Special tax district

Without the right tools, these filings can become overwhelming fast.

Feeling Overwhelmed? doola Can Help.

Sales tax compliance doesn’t have to drain your time and energy. doola helps businesses:

• Determine where they have Nexus
• Register for sales tax permits
• Manage filings and deadlines
• Automate reseller certificate management
• Stay compliant across all channels

Whether you’re selling across five states or 50, doola takes care of the tax so you can take care of the business.

👉 Book your free demo with doola

FAQ: Sales Tax for E-Commerce

What is Nexus in sales tax?

Nexus is a legal term that means your business has a sufficient presence in a state to be required to collect and remit sales tax.

Do I need to collect sales tax for online sales?

Yes, if your business reaches Nexus in a state, you must collect and remit sales tax—even for online transactions.

What if I sell on Amazon and Shopify?

Marketplace platforms like Amazon typically collect tax for you. But if you sell through your own website, you’re responsible for collecting and remitting sales tax unless your platform does it automatically.

How can I track local tax rates?

Sales tax rates vary by city and county. Tools like doola can automate these calculations and generate the necessary reports for each jurisdiction.