A Clear Guide to Sales Tax Compliance
Understand your obligations for physical and economic nexus.
Why Sales Tax Exists
Sales tax is the primary funding mechanism for essential public services in your state and local community.
Two Types of Nexus
Nexus is the connection between a business and a state that triggers a sales tax obligation.
Physical Nexus
A tangible presence in a state that creates a tax obligation.
- Office or warehouse location
- Employees working in the state
- Inventory stored in the state
Economic Nexus
Based on sales volume or transaction count in a state.
- Exceeding sales revenue thresholds
- Common threshold: $100,000 in sales
- Or 200+ separate transactions
Economic Nexus Thresholds
Most states have adopted economic nexus laws since the landmark 2018 South Dakota v. Wayfair decision.
Example: Sales by State vs. Threshold
States with Economic Nexus Laws
Your Compliance Obligations
Once nexus is established, follow these four steps to stay compliant.
Register
Apply for a sales tax permit in each state where you have nexus. Never collect tax without a valid permit.
Collect
Charge the correct sales tax rate at the point of sale based on the ship-to address and product taxability.
File & Remit
Submit returns and remit collected tax on schedule—monthly, quarterly, or annually depending on the state.
Manage
Keep records, monitor threshold changes, and update registrations as your business footprint evolves.
Resale Certificates
Resale certificates allow tax-exempt purchases when goods are bought for resale, not personal use.
Why You Need One
- ✓Protects your profits — avoid paying tax on inventory you will resell
- ✓Smooths transactions — streamlines purchasing with suppliers
Why You Should Collect Them
- ✓Eliminates audit risk — documented proof of tax-exempt sales
- ✓Builds trust — shows professionalism and compliance to partners
Download Resale Certificate Forms
Use the Multistate Tax Commission (MTC) or Streamlined Sales Tax (SST) certificate depending on the state.
MTC Accepted States 37
SST Accepted States 24
How to Fill Out Your Resale Certificate
Seller Information
IDProductSource LLC
728 SW Munjack Circle
Port Saint Lucie, FL 34986
Buyer Information
Enter your company name, address, and state tax ID / resale permit number.
Reason for Exemption
Select "Resale" as the exemption reason and provide your state-issued resale certificate or permit number.
Drop Shipping Quick Reference
- CA / MA / MS — Need a pass-through certificate
- DC / HI / MD — Always taxable (no exemption available)
- All other states — Need a no-nexus letter
Tips for Completing the Form
- Describe items as "Promotional Products for Resale"
- State your business description clearly (e.g., "Promotional products distributor")
- Check the correct business type (Corporation, LLC, Sole Proprietor, etc.)
- Sign and date the form — unsigned certificates are invalid
Freight Forwarders & International Orders
For orders shipped outside the U.S. through a freight forwarder, sales tax may be refundable.
How the Process Works
Tax Charged Initially
Sales tax is applied at the time of purchase based on the domestic shipping address.
Provide Export Proof
Submit documentation proving the goods were exported outside the United States.
Refund Issued
Once verified, a refund of the sales tax collected is issued to the buyer.
Required Documents
Bill of Lading
Official shipping document showing origin, destination, and goods description for the international shipment.
Affidavit of Export
Signed sworn statement confirming the merchandise was exported and will not be returned to the U.S. for domestic use.
This information is for educational purposes only and does not constitute legal or tax advice. Consult a qualified tax professional for advice specific to your business.
