Tax season is around the corner, and at the beginning of each year many businesses start reviewing their tax compliance. One of the most challenging topics for foreign companies entering the US market is sales tax. Why? Because it varies significantly from state to state.

Originally, US Sales Tax was designed to apply to the sale of tangible goods in a single physical location. However, with the rise of e-commerce, software, and digital services, individual state laws have evolved in their own ways.

Today, there are 45 different Sales Tax frameworks across the US, and five states with no sales tax at all: Alaska, Delaware, Montana, New Hampshire, and Oregon, often referred to as the NOMAD states.

There Is No Single Concept of Sales Tax

The real complexity begins when differences arise not only between states, but also within states themselves. Counties, cities, and even special districts, may impose additional local sales tax rates. As a result, the final tax burden can vary significantly depending on where exactly you are selling.

Sales Tax rates are usually in the single digits, but in some jurisdictions such as Louisiana, parts of Southern California, and Chicago, they can exceed 10%. Many states exempt certain goods or services, but these exemptions are highly state-specific. What qualifies as a taxable or non-taxable service in one state may be treated completely differently just across the state line.

One particularly challenging area for international businesses is the taxation of Software-as-a-Service (SaaS). Taxability of SaaS products varies widely and often depends on the state, the nature of the software, and whether the customer is a business or an individual.

Delaware Registration Does Not Automatically Exempt You

Sales tax must always be collected in states where you have physical nexus – like an office, employees, or even a third-party warehouse.

If your only office is in Delaware, you may initially avoid Sales Tax obligations, since Delaware does not impose sales tax. However, this changes once economic nexus is triggered. Economic nexus depends on the volume or frequency of sales into a particular state.

If your Delaware-based company generates $100,000 in revenue in New Jersey, or issues more than 200 invoices to New Jersey customers in a calendar year, it must register for sales tax in New Jersey, charge sales tax on all taxable sales, remit the tax, and file regular returns. Each state defines economic nexus differently, making compliance even more complex.

Are There Any Sales Tax Exemptions?

Yes, but fewer than many European businesses expect. Unlike VAT in the EU, US sales tax exemptions generally apply only to direct resale transactions. To qualify, you must provide the exemption certificate to your supplier.

Other exemptions may apply when selling to government entities, educational and religious institutions, or non-profit organizations. These exemptions follow strict rules, and you always must collect exemption certificates from customers who claim exemption.

Why You Need a CPA to Navigate Sales Tax

Sales tax compliance becomes especially complex for businesses operating across multiple states or selling large volumes of products or services. In practice, it is nearly impossible to manage compliance without specialized software such as Avalara, TaxJar, or Stripe Tax.

Even while using this software, you will still need guidance from a CPA on how to classify products, how to register in different jurisdictions, and how to file returns. To navigate the US Sales Tax jungle successfully, you need an experienced guide in the form of a CPA.