Invoice questions › Do I charge sales tax on my invoice?
Do I charge sales tax on my invoice?
Only if you have nexus in your customer's state, what you sold is taxable there, and the customer has given you no exemption certificate.
US sales tax is not VAT, and treating it like VAT is how people get this wrong. VAT applies at every stage and businesses deduct what they were charged. Sales tax applies once, at the retail sale to the end user, and there is nothing to deduct. It is set by states, counties and cities rather than nationally, so the question is never simply "what is the rate" but "whose rate, and do I have to collect it at all".
Three questions, in order
Do you have nexus in your customer's state? Nexus is the connection that obliges you to collect there. Physical presence — an office, staff, inventory in a warehouse — has always created it. Since South Dakota v. Wayfair in 2018, sales alone can too. The common threshold is $100,000 of sales into the state in a year; California, Texas and New York set theirs at $500,000, Alabama and Mississippi at $250,000. The old "or 200 transactions" test is on its way out — seventeen states had dropped it by August 2026.
Is what you sold taxable there? Physical goods usually are. Services often are not, but this varies more than anything else in the area and more states tax more services every year. Software and digital products are a tangle of their own. Check the state rather than the general rule.
Does the customer have an exemption? This is the nearest thing to the EU's reverse charge. A reseller, a manufacturer buying inputs, a non-profit or a government buyer hands you a resale or exemption certificate; you charge no tax, and you keep the certificate. If you are audited and cannot produce it, the tax is yours to pay.
Register before you collect
If the answers say you have to collect, register with that state for a sales tax permit before you do. Collecting tax you are not registered to collect is a problem in its own right, quite separate from failing to collect tax you should have.
Which rate
The rate is usually state plus county plus city plus any special district, and most states source it to where the customer takes delivery rather than where you are. There are thousands of taxing jurisdictions and their boundaries do not follow zip codes. Past a handful of in-state customers, this is what sales tax software exists for.
Five states levy no statewide sales tax at all: Alaska, Delaware, Montana, New Hampshire and Oregon. Alaska is the catch — no state tax, but plenty of local ones.
Give it its own line
Show sales tax as a separate line rather than folding it into your prices. Several states, New York and Washington among them, require exactly that. And where an invoice mixes taxable and non-taxable items, failing to separate them can make the entire invoice taxable — an expensive way to save a line.
In this editor the tax column and the totals are labels like everything else, so "VAT" becomes "Sales tax" and the rate line reads the way your customer expects it to.
In the editor you rename the tax label to "Sales tax" and it lands on the invoice as its own separately stated line. No account needed to look around.
Create an invoiceRelated
This page is a summary, not legal advice. Sales tax is set by each state, and often by the county and city as well, so check with your state's revenue department — the Federation of Tax Administrators lists them all — or ask your accountant.