Sales tax: which states do you actually have to register in?

There are two ways to discover US sales tax. The first is by preparing for it. The second is by receiving a letter from a state claiming three years of arrears, interest included.

The difference between the two comes down to one concept, nexus, and one habit: counting your sales state by state.

What nexus is, in one sentence

Nexus is the link that makes you liable in a state. It comes in two forms. Physical nexus, tied to a presence on the ground, a warehouse, an employee or inventory. And economic nexus, tied to sales volume alone, with no presence at all.

The second one is what concerns a non-resident seller. Since the 2018 *South Dakota v. Wayfair* decision, a state can require you to collect its tax although you have never set foot there, as soon as you cross its threshold.

The thresholds, and what is misleading about them

The most common threshold is one hundred thousand dollars in sales or two hundred transactions over a rolling twelve-month period. Three traps hide behind that apparently simple formula.

The “or” is not an “and”

Two hundred transactions at fifteen dollars is three thousand dollars of revenue, and it is still enough to trigger the duty in states that kept the transaction count. A seller of small items reaches the threshold long before a seller of expensive ones.

Several states dropped the transaction count

California, Texas and Washington State, among others, look only at the amount, often with a higher threshold, five hundred thousand dollars for the first two. A dozen states have abandoned the transaction count since 2019, because it trapped tiny sellers.

Twelve months is not the calendar year

Most states work on the last rolling twelve months, or on the previous calendar year. A good holiday season can therefore make you liable in February, for sales made in November.

States with no sales tax, and states that tax services

Five states have no statewide sales tax: Alaska, Delaware, Montana, New Hampshire and Oregon. A sale delivered into one of them counts toward no threshold and never triggers a registration there, even though Alaska lets some municipalities levy a local tax. This detail explains why the state where your LLC is formed has no effect on sales tax: a Wyoming company, in a state that taxes goods, collects nothing until it delivers to Wyoming customers beyond the threshold.

The second point that surprises service sellers: sales tax is aimed first at physical goods. Consulting, development or design services sold to businesses are almost never subject to it. Downloaded software, SaaS subscriptions and digital products, on the other hand, are taxed in around thirty states, with definitions that change from one state line to the next. A freelancer billing US companies can therefore cross every threshold without ever having to collect, while a SaaS publisher has to watch sales state by state, as we explain in our guide to the LLC for an app or a SaaS.

What does not count toward the threshold

Sales made through a marketplace are excluded from the calculation in most states. Amazon, Etsy and eBay already collect the tax under the marketplace facilitator regime, and those sales do not make you personally liable.

In other words, a seller who only works on Amazon usually has nothing to do. The one who opens their own store, on Shopify for instance, starts accumulating sales that do count, as explained in our article on selling through Shopify.

What happens once the threshold is crossed

Three duties follow, in this order. You register with the state’s department of revenue. You collect the tax on every sale delivered into that state, at the rate of the delivery locality, which varies within a single state. Then you file and remit on a schedule the state sets, monthly, quarterly or annually depending on your volume.

Collecting without registering is a violation, not a shortcut: charging a tax you are not authorized to collect carries penalties of its own, separate from failure to file.

In practice, the monitoring is done with a tool rather than by hand. Stripe Tax, TaxJar or Avalara match each sale to its delivery address, keep a count per state, alert you as you approach a threshold, then calculate the exact rate for each locality. Their cost is nothing compared with settling three years of arrears. The smart habit: switch on the calculation from your first sale outside a marketplace, even far below the threshold, because that history is what you will rely on the day you reach it.

If you have already crossed a threshold without knowing

Most states run a voluntary disclosure program, the *voluntary disclosure agreement*. It generally caps the look-back period at three or four years and waives penalties, provided you make the first move before the state writes to you.

It is the same logic as with a late Form 5472: coming forward always costs less than being found.

The confusion to avoid with VAT

Sales tax is not VAT. It is not reclaimed on purchases, it is not deducted, and it only applies to the final sale to a consumer. A seller used to VAT or GST often reasons backwards on this point, which we cover in sales tax versus VAT.

What this changes for your company

Sales tax has no link with income tax. Your LLC stays fiscally transparent, pays no federal corporate tax, and files its Form 5472 every year, whether or not you collect any sales tax.

They are two separate calendars, two different administrations and two distinct risks. Confusing them causes just about every late filing we see.

LLC Place forms your company, obtains your EIN and tracks your federal and state deadlines, so the only thing left for you to watch is your sales volume.

Frequently asked questions

Does my Wyoming LLC have to collect sales tax in every state?

No. The state of formation has no bearing on it. You only collect in the states where your delivered sales exceed the economic nexus threshold, usually $100,000 over twelve months, and only on sales made outside a marketplace.

Do Amazon sales count toward the nexus threshold?

In most states, no: Amazon collects and remits the tax as a marketplace facilitator, and those sales are left out of the calculation. A few states still count them toward the threshold without asking you to collect on them, which only brings forward the moment your own store becomes liable.

Does a freelancer billing US clients have to collect sales tax?

Almost never. Consulting, development or design services sold to businesses are not subject to sales tax in nearly every state. Only software, subscriptions and digital products are taxed, in around thirty states.

What happens if I cross the threshold without registering?

The state can claim the uncollected tax over several years, with penalties and interest, even though you never charged it to your customers. The voluntary disclosure program limits the look-back period and waives penalties, provided you come forward before the state writes to you.