Do I Need to Collect Sales Tax for Online Sales?

Short Answer: Maybe. Selling online does not automatically mean you need to collect sales tax everywhere you make a sale.

Your responsibility generally depends on where your business has sales tax nexus, what you sell, where your customers are located, and the rules of each state.

Why This Matters

Online businesses can sell to customers across many states without ever physically operating there.

That creates a common question: Which states actually expect me to collect sales tax?

A business may create sales tax obligations through:

  • A physical location

  • Employees or inventory in a state

  • A significant amount of sales into a state

  • Other activities that create nexus under that state's rules

Once nexus exists, the business may need to register, collect the appropriate tax, file sales tax returns, and send the tax collected to the state.

Common Mistakes

  • Assuming online businesses do not have to collect sales tax

  • Collecting sales tax without first registering

  • Assuming every state has the same rules

  • Waiting until sales become very large before reviewing nexus

  • Forgetting that inventory stored by a third party may affect obligations

  • Treating collected sales tax as business income

  • Assuming a marketplace handles every sales tax responsibility

Harvest's Recommendation

Know where your customers are and monitor sales by state.

As online sales grow, periodically review whether your activity may have created sales tax nexus in additional states.

If you sell through multiple channels, such as your own website and an online marketplace, review them together rather than looking at each platform in isolation.

Good to Know

Sales tax that you are required to collect and remit generally is not business income. You are collecting it from the customer on behalf of the taxing authority.

Also, having customers in a state and having a sales tax filing obligation in that state are not necessarily the same thing.

When It's Time to Get Help

Consider talking with an accountant or sales tax professional if:

  • You sell into multiple states

  • Your online sales have increased significantly

  • You use several marketplaces or selling platforms

  • Inventory is stored outside your home state

  • You have received a notice from another state

  • You are unsure where your business has nexus

  • You have been collecting sales tax but are unsure whether it has been filed correctly

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