How online businesses pay US sales tax

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An online business pays US sales tax in each state where it meets that state's physical presence, economic nexus, or other registration rule. Marketplaces often collect tax on facilitated sales, but a seller must still test its own sales, register where required, charge the proper rate, and file returns.

The Supreme Court's June 21, 2018 decision in South Dakota v. Wayfair allowed states to require sales or use tax collection from sellers without a physical location there. States can now impose collection duties based on economic activity within their borders.

Area	Rule or figure	Business action
Physical presence	Registration applies regardless of sales volume	Register in that state
California nexus	More than $500,000 of specified California goods sales	Include related persons' sales and marketplace sales
Texas safe harbor	Under $500,000 of counted Texas revenue in the prior 12 months	No permit or collection duty for a remote seller
Tennessee dealer threshold	$100,000 or more for a dealer based outside Tennessee without physical presence there	Register and collect
Texas tax rate	6.25 percent state rate, local tax up to 2 percent	Texas remote sellers use the delivery rate or may elect the single rate
Tennessee tax rate	7 percent state rate, local tax up to 2.75 percent	Apply the local rate where required
Returns	Each state sets its filing frequency	File even for a zero-sales period

Find the states where tax is owed

Start with physical presence. A seller that has physical presence in a state is not treated as a remote seller there and must register, whatever its sales amount.

Then test economic nexus in every state where customers receive goods or services. Many states have these rules, but their measurements differ. A state may count gross sales, gross revenue, retail sales, or only taxable sales.

A retailer and related persons meet California economic nexus after sales of tangible goods delivered there exceed $500,000 in either the current or preceding calendar year. Marketplace-facilitated sales count in that calculation.

Texas gives a remote seller a safe harbor when its total Texas revenue is below $500,000 for the preceding twelve calendar months. That calculation includes separately charged handling, transportation, and installation charges, resale sales, and sales to exempt entities.

A dealer based outside Tennessee, with no physical presence there, must register and collect after sales to Tennessee customers reach $100,000. The measure includes taxable and exempt retail sales, but excludes resale transactions.

For example, that dealer, based outside Tennessee and with no physical presence there, has $72,000 of taxable retail sales to Tennessee customers, $31,000 of exempt retail sales, and $8,000 of resale sales. The threshold calculation is $72,000 plus $31,000, which equals $103,000; the $8,000 resale amount is left out.

That seller reaches the $100,000 Tennessee threshold.

Read more about when a US business must charge sales tax before treating one state's result as a rule for another.

Separate marketplace sales from direct sales

Marketplace facilitator laws often make the marketplace responsible for tax on sales it facilitates after it reaches the state's threshold. The seller still needs to know which sales the marketplace collected and which sales remain its own responsibility.

Under California's Marketplace Facilitator Act, a marketplace facilitator generally collects, reports, and pays tax on facilitated retail sales delivered in California. This arrangement has applied since October 1, 2019.

A California seller does not need to register as a retailer when every tangible-goods sale is handled by registered marketplace facilitators. A seller making sales through its own website may still need registration.

When a marketplace provider certifies tax collection, a Texas remote seller whose sales are entirely through that provider does not need a Texas permit. Yet marketplace sales still count in the Texas safe harbor calculation.

Even where a marketplace handles collection, a seller based in Texas must hold an active sales and use tax permit. Texas gives all sellers, including marketplace sellers and providers, a minimum four-year retention period for required records.

Tennessee requires marketplace facilitators with more than $100,000 of Tennessee sales during the prior 12 months to collect and remit tax. The rule has applied since October 1, 2020.

A Tennessee marketplace seller with its own website can still need registration after reaching $100,000 in Tennessee sales during the prior 12 months. Do not treat marketplace collection as proof that direct sales create no duty.

Register before collecting

Register in every state where the business meets physical nexus, economic nexus, or another state requirement. Registration may be made through a state's process or by using the Streamlined Sales Tax Registration System (SSTRS).

SSTRS registration itself has no charge, though a state can charge a fee where registration is legally required. A seller can choose from all 24 Streamlined member states when using SSTRS.

Tennessee is an associate member rather than a full Streamlined member. For a state outside the Streamlined group, use that state's registration process.

Tennessee requires electronic sales and use tax returns and payments through the Tennessee Taxpayer Access Point (TNTAP). SSTRS handles registration only, so returns do not go through that system.

For a broader view of setup and reporting, see how a small business registers for and files sales tax.

Charge the rate that applies to the sale

Sales tax on a taxable sale equals the taxable price multiplied by the state rate plus the local rate.

For most goods and taxable services sold at retail, Texas applies a 6.25 percent state sales and use tax. Local jurisdictions can add up to 2 percent, making the highest combined Texas rate 8.25 percent.

A Texas remote seller that does not fulfill an order from a Texas business location applies local use tax at the Texas delivery location. It may instead use the single local use tax rate.

On October 19, 2026, the Texas single local use tax rate stood at 1.75 percent. The Texas Register publishes that rate by January 1 each year, so it can change.

For example, a $200 taxable Texas remote sale using that rate has tax of $200 multiplied by 8 percent. The result is $16, made up of $12.50 state tax and $3.50 local tax.

Tennessee sets its general state sales tax at 7 percent for most taxable services and tangible personal property. Its local sales and use tax rate is capped at 2.75 percent.

More detail on the basic system is available in how US sales tax works for businesses.

File returns and pay the tax collected

Use each state's online filing system to report sales tax and send payment. The state sets the filing frequency, and returns remain required even when there were no sales in that period.

Tax to remit is the total tax collected on taxable sales for that state. Sales supported by a valid exemption certificate carry no tax.

Texas monthly filers must submit reports by the 20th day of the following month. Tennessee monthly sales tax returns are also due on the 20th day after the reporting period closes.

A Certified Service Provider (CSP) handles sale-level tax calculations and can prepare and submit returns. Under the Streamlined scheme, a remote seller collecting only because it meets economic nexus can qualify for free CSP services in Streamlined member states.

Handle exemption certificates carefully

All 24 Streamlined member states accept the Streamlined Sales Tax Exemption Certificate. For a sale assigned to a Streamlined state, a completed certificate means the seller should not charge tax.

The customer supplies the completed certificate to the seller and retains a copy. Neither the state nor the Streamlined Sales Tax Governing Board receives the completed certificate.

For the Streamlined Sales Tax Exemption Certificate, the seller does not have to verify the buyer's identification number. The Streamlined Sales Tax Governing Board notes that Georgia requires verification.

Not every exemption is available in every state, so the buyer must confirm state eligibility.

In Tennessee, sellers must obtain and retain resale certificates to document resale sales that were not taxed. After registration for a sales and use tax account, Tennessee automatically issues a Certificate of Resale, and every business location requires a separate certificate.

Tennessee resale certificates do not expire, though a vendor can ask for a recent copy. Tennessee also allows a resale buyer to use the Streamlined certificate when it is marked for resale and includes the buyer's Tennessee account ID.

Common questions

Does marketplace collection remove every sales tax duty?

No. Marketplace collection may cover facilitated sales, while direct website sales can create registration and collection duties. Marketplace sales can also count toward California and Texas nexus tests.

Must a seller file a return if it made no sales?

Yes, a registered seller must file even for a reporting period with no sales in that state. The filing frequency comes from the state.

Can a seller use SSTRS to file returns?

No. SSTRS is for registration, not return filing. Returns and payments go through each state's filing system.

What records should a seller keep for exempt sales?

Tennessee sellers must obtain and retain resale certificates for untaxed resale sales. Texas requires every seller, marketplace seller, and marketplace provider to retain required records for at least four years.

Sources

• Streamlined Sales Tax Governing Board: SCOTUS Ruling - South Dakota v Wayfair
• Streamlined Sales Tax Governing Board: Remote Seller State Guidance
• Streamlined Sales Tax Governing Board: Marketplace Facilitator
• California Department of Tax and Fee Administration: Tax Guide for Marketplace Facilitator Act
• Texas Comptroller of Public Accounts: Remote Sellers
• Texas Comptroller of Public Accounts: Remote Sellers and Marketplace Frequently Asked Questions
• Tennessee Department of Revenue: Out of State Dealers Marketplace Facilitators
• Streamlined Sales Tax Governing Board: Sales Tax Registration SSTRS
• Streamlined Sales Tax Governing Board: Remote Sellers
• Tennessee Department of Revenue: Registration
• Texas Comptroller of Public Accounts: Sales and Use Tax
• Tennessee Department of Revenue: Due Dates and Tax Rates
• Streamlined Sales Tax Governing Board: FreeServices
• Streamlined Sales Tax Governing Board: Exemptions
• Tennessee Department of Revenue: Sales Tax Exemptions
• web.archive.org: SUT-31 - Sale for Resale - Resale Certificate - Overview - Tennessee Department of Revenue