Sales Tax
State and local taxes on retail sales. Requirements vary by nexus in each state.
1 min readLast updated Apr 2026
Quick Reference
CategoryLegal, Compliance & Privacy
Related Terms2
State and local taxes on retail sales. Requirements vary by nexus in each state.
Why It Matters
Collecting and remitting sales tax is legally required once you have nexus. Non-compliance leads to back-taxes, penalties, and interest.
Practical Example
Scenario
A candle brand hits $100K in California sales, triggering economic nexus.
Calculation
California threshold: $500K (as of 2024). Brand exceeds Texas threshold of $500K. Must register, collect, and remit.Result
Registered for sales tax, automated collection with TaxJar, avoiding 25%+ penalties on uncollected tax
Pro Tips
- 1Use automated tax software (TaxJar, Avalara) as soon as you have nexus in multiple states
- 2Monitor your sales by state to know when you're approaching thresholds
- 3Consider marketplace facilitator laws—Amazon, Etsy handle tax for sales on their platforms
Common Mistakes to Avoid
Ignoring economic nexus until you get a notice—back taxes with penalties are expensive
Not collecting tax from day one in your home state where you have physical nexus
Forgetting that tax rates vary by product category and locality, not just state