What states do not charge sales tax on internet purchases

Sales tax basics

If you're online seller trying to decide if you need to collect sales tax, first determine if your home state has a sales tax at all. Most states do impose sales taxes, but several—like Alaska and Oregon—do not.

Some cities and towns charge an additional sales tax. For example, in California, the statewide sales tax rate was 7.25% in 2022, and local districts can impose their own additional sales taxes. A seller needs to know the local tax rates and collect the tax from their customers. Many states that collect sales tax also exempt certain items—like food products—from taxation.

When you are obligated to collect sales tax online

The basic rule for collecting sales tax from online sales is:

• If your business has a physical presence, or “nexus”, in a state, you are typically required to collect applicable sales taxes from online customers in that state.
• If you do not have a physical presence, you generally do not have to collect sales tax for online sales. However, in June of 2018, the U.S. Supreme Court issued a ruling that will likely change this exemption to collecting sales tax. States are expected to begin collecting sales taxes regardless of having a physical presence in the state.

A physical presence means that you have some business facility in that state. It could be any type of business operation, such as:

• A storefront
• An office
• A warehouse

The nexus required between seller and state

The word "nexus" is used by the law to describe a connection. In this case its the connection sellers have with a particular area before they are required to charge and collect taxes for online sales there.

Different states and courts define this connection differently. However, most agree that if you have a store or an office in a state, this requires you to collect and submit sales taxes in that state.

Many states have laws that describe eligibility factors, so be sure to start there. If you aren't certain whether you have a sufficient presence in a state for sales tax purposes, check with that state's taxing agency.

Selling across many states

If you send products or inventory to a large, online company that distributes them to buyers for you, you may have created "connections" in many states in addition to your own.

For example, if you sell online from your own home in California and don't have any business presence in other states, you typically have "nexus "—or a physical presence—only with California.

But if you sell your products through Amazon’s FBA program (Fulfillment by Amazon), you send inventory to Amazon first. That relationship would typically require you to collect sales tax from customers in other areas where Amazon does business.

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