Sales tax on invoices: what small businesses need to know

There is no federal sales tax in the United States. States, and often cities and counties, set rates and decide what is taxable, so the right answer depends on what you sell and where it goes.

Updated: October 2026General information, not legal or tax advice

Who collects it

If you sell taxable goods or services in a state where you are registered, you collect sales tax from the customer, show it on the invoice and pay it to the state on a regular return. Most states require a seller’s permit or registration before you start collecting. Alaska, Delaware, Montana, New Hampshire and Oregon have no general state sales tax (some Alaska localities do tax sales).

When you must collect in another state

Since the Supreme Court’s South Dakota v. Wayfair decision (2018), a state can require a remote seller to collect its tax once its sales into that state pass a threshold, even without a physical presence. A common threshold is $100,000 in sales; some states also count transactions or use other limits. Sales through a marketplace are often collected by the marketplace itself. Check each state where you sell.

Which rate to use

Use the combined rate (state plus local) for the place that applies to the sale. State base rates and average combined rates are listed in sales tax rates by state. Many states tax based on where the buyer receives the goods (destination), others on the seller’s location (origin). A single rate per invoice is the usual case; if one order ships to several places, invoice per place.

What is taxable

Goods are usually taxable.
Services are taxable in some states and not in others, and some states tax only certain services.
Shipping and handling are taxable in some states, and only when billed together with taxable goods in others.
Software and digital products follow different rules in different states.

Mark each line taxable or non-taxable, and show tax separately from the subtotal. Ask your state’s revenue department or a tax professional for the rule that applies to you.

What to show on the invoice

The subtotal, the tax rate and tax amount on their own line (for example “Texas sales tax (8.25%)”), and the total.
A note when the sale is exempt, with the customer’s certificate number. See invoicing a tax-exempt customer.
Your sales tax permit number, if you want your customers to be able to document the tax they paid.

Frequently asked questions

Do I charge sales tax on services?

It depends on the state. Many states do not tax most services, others tax specific ones. Check your state’s rules or ask a tax professional.

Is shipping taxable?

In some states shipping is taxable, in others only when billed together with taxable goods or not at all. Check your state.

Can I collect sales tax without a permit?

Generally no. Register with your state first, then collect.

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This page is general information as of October 2026. Rules differ by state and industry; check your situation with a tax professional or your state’s revenue department.