“Do I add sales tax to this invoice?” is one of the most common questions US small businesses ask — and the honest answer is “it depends.” Sales tax in the US is set by states (and sometimes cities and counties), so the rules change with where you operate and what you sell. Here’s how to think about it.
There is no federal sales tax
Unlike VAT or GST in other countries, the US has no national sales tax. Each state sets its own rules and rates, and five states (Alaska, Delaware, Montana, New Hampshire and Oregon) have no statewide sales tax at all — though some localities in them do. So the first question is always: which state’s rules apply?
Do you have “nexus”?
You generally charge a state’s sales tax only if you have nexus there — a connection such as a physical presence (office, staff, inventory) or enough sales into the state to cross its economic-nexus threshold. If you have nexus in a state and sell something taxable to a customer there, you typically collect that state’s tax.
Are services taxable?
Physical goods are taxable in most states; services are where it gets tricky. Many states don’t tax professional services (design, consulting, writing), some tax specific services, and a few tax services broadly. Digital products and SaaS are treated differently again. Check your state’s guidance for your specific service.
How to show sales tax on an invoice
When you do charge it: show the taxable subtotal, the sales tax as a separate line with the rate, and the total. If some items are exempt and others aren’t, apply the rate per line. Keeping tax separate makes your invoice clear for the customer and clean for your books.
Create an invoice with sales tax free
Our free invoice generator lets you set a US sales tax rate per line (or mark items exempt) and shows the tax separately on the PDF — no sign-up.