Do I Need to Charge Sales Tax on My Products or Services?

By Bill Stilwell · Last reviewed October 17, 2026

The short answer

There is no federal sales tax. Each state decides what’s taxable, and many cities and counties add their own rates. Most states with a sales tax tax physical products, but which services are taxed varies a lot from state to state. Check your state revenue department’s rules for what you sell, get a sales tax permit before your first taxable sale, charge the right rate, and file on the schedule your state assigns.

What this means

Sales tax is a tax on the sale of goods and some services. The seller usually collects it from the customer and sends it to the state. You hold that money for the state. It isn’t yours.

Key ideas:

State by state. Your state’s department of revenue sets what’s taxable and the rate. A few states have no statewide sales tax, and some of those still allow local sales taxes.
Products vs. services. Physical products are often taxable. Services are a mixed picture. One state may tax landscaping or pet grooming, and the next may not. Some tax parts but not labor.
Local rates. Cities, counties, and special districts often add their own rate on top of the state’s.
Permit. Most states require a sales tax permit (sometimes called a seller’s permit or license) before you make taxable sales.
Out-of-state customers. In 2018, in South Dakota v. Wayfair, the U.S. Supreme Court decided states can require sellers with no physical presence to collect sales tax. Many states now require it once remote sales pass a set amount (see 10.2.7 Economic Nexus).
Exempt sales. Some buyers, like resellers or certain nonprofits, can buy without paying tax if they give you the right certificate (see 10.2.5 Resale and Exemption Certificates).

Made-up example: Golden Hour Candle Co. sells candles from a home studio and online. Its state taxes candles. The owner gets a sales tax permit, sets her online store to charge the state and local rate, and files returns each quarter. When a gift shop buys candles to resell, she keeps its resale certificate on file and doesn’t charge tax.

Why it matters

You owe it even if you didn’t collect it. If you should have charged tax and didn’t, the state can bill you for it.
Penalties and interest pile up on late or missing returns.
It’s trust money. Spending collected sales tax can lead to serious trouble.
Customer trust. Charging tax on something that isn’t taxable, or adding it by surprise, frustrates customers (see 11.3.2 Pricing Disclosures).

Who this applies to

Any business that sells taxable products or services in a state with a sales tax. Service businesses should check, not assume, especially if they also sell parts, materials, or digital products. Online sellers should check every state where they ship. Rules vary by state, so your state department of revenue is the place to check.

How to do it

List what you sell. Break it into products, services, parts and materials, shipping, and digital items.
Check your state’s rules for each item on the department of revenue website. Search “taxable services” and your industry. The SBA’s “Pay taxes” page links to every state’s revenue department.
If anything is taxable, get a sales tax permit before your first taxable sale (see 10.2.1 State Income Tax for registering).
Find the right rates. Most states offer a rate lookup by address. Use the rate for where the sale happens or where you deliver, as your state requires.
Set up your invoices and checkout to charge tax only on taxable items (see 10.7.5 Invoices).
Collect exemption and resale certificates before you skip tax on a sale.
Hold collected tax separately. Many owners move it into a separate account.
File and pay on schedule. States assign monthly, quarterly, or yearly filing. Some require a return even when you had no sales.
Check other states if you sell or ship across state lines (see 10.2.7 Economic Nexus).
Review yearly or when you add a new product or service.

What proof to keep

Your sales tax permit
Notes or screenshots showing how you confirmed what’s taxable
Every sales tax return and payment confirmation
Sales records showing tax charged on each sale
Resale and exemption certificates

Keep these for at least as long as your state requires (see 9.8.2 Record Retention Periods).

Common mistakes

Assuming services aren’t taxable. Many are, depending on the state.
Using one rate everywhere. Local rates change by address.
Skipping zero returns. Many states still want a filing.
Not keeping exemption certificates. Without one, the sale may be treated as taxable.
Spending collected tax.
Ignoring remote sales. Online sellers can owe tax in other states.
Forgetting to update when you add a new product or service.

When to get help from a pro

CPA or state and local tax specialist: if you sell several kinds of items, sell in more than one state, or aren’t sure what’s taxable. Questions to ask:

Which of my products and services are taxable in my state?
Do I need to collect tax in any other states?
How often will I file, and what records should I keep?

Bill’s note

[Bill: add a short note. For example, what you found out about whether SiteSmarty’s services are taxable in your state, or a client who got a surprise sales tax bill.]

How I did this for SiteSmarty

[Date I did this:]
[What I actually did, step by step: how I checked whether SiteSmarty’s services are taxable and whether I needed a permit]
[What it cost and how long it took:]
[What surprised me or what I’d do differently:]
[Screenshot or photo to add, with private info blurred: the permit, or the state page showing the taxability rule]
[Result so far:]

Questions people ask

Are services taxable? Sometimes. Each state decides which services are taxable, so check your state department of revenue.

How do I get a sales tax permit? Apply with your state department of revenue, usually online. Have your EIN and business details ready.

What rate do I charge? The state rate plus any local rates that apply. Most states have an address lookup tool.

Do I charge tax to customers in other states? You may, if your sales there pass that state’s limits. The Supreme Court’s 2018 Wayfair decision allows states to require it.

How often do I file? Your state assigns monthly, quarterly, or yearly filing, often based on how much tax you collect.

Audit check

Question: Has the business confirmed what it sells is taxable, and does it collect, report, and pay sales tax correctly where required?
Pass looks like: Taxability checked and noted for every item. Permit in place if needed. Correct rates on invoices. Certificates on file. Returns filed and paid on time. Other states reviewed.
Fail looks like: Never checked. No permit while making taxable sales. One rate for everyone. Missing returns. Collected tax spent.
Evidence to collect: Permit, taxability notes, sample invoices, returns, payment confirmations, and exemption certificates.

Where this fits

Do this first: 10.2.1 State Income Tax

Do this next: 10.2.3 Use Tax

Sources

SBA, "Pay taxes" (checked October 17, 2026)
SBA, "Get federal and state tax ID numbers" (checked October 17, 2026)
Supreme Court of the United States, Docket 17-494, South Dakota v. Wayfair, Inc. (decided June 21, 2018) (checked October 17, 2026)

This page explains general rules and Bill's own experience. It is not legal, tax, or insurance advice. Talk to a qualified professional about your situation.