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How Do You Calculate Sales Tax if You’re a Remote Seller?

How Do You Calculate Sales Tax if You’re a Remote Seller?

First things first: you’re a “remote seller” if you sell products or services into a state where you don’t have a physical presence. 

Say you have a physical location in Michigan, but you sell goods to consumers in other states. Congratulations! You’re officially a remote seller - one who may be required to collect and file sales taxes to states other than your own.

Calculating Your US Sales Tax Obligations

To determine whether or not you need to pay US sales taxes to other states, you have to first find out whether or not you have a “nexus” (or, “connection”) in the state.

You might have a nexus in an external state if you meet any of the following conditions, among others:

  • Having a physical location in another state
  • Generating a sufficient sales or transaction volume in the state to create an “economic nexus
  • Making sales through an affiliate arrangement with a local business in another state

You’ll also have to make sure that the state you have a potential nexus with actually has a local or state sales tax. No sales tax? No obligations on your part.

US Sales Tax Thresholds

If you think you might have a nexus in another state, use the table below to calculate whether or not you meet the state-by-state sales and/or transaction requirements to be required to collect and remit sales tax:

Use this table for guidance only. Rates change. States add restrictions and repeal others.

To confirm whether or not you need to calculate sales tax as a remote seller, use a tool like Quaderno that automates US sales tax compliance. Never worry again about whether you’ve calculate the right taxes, at the right rates. Our software takes the headache out of sales tax management so that you can get back to what you’re best at.

How to Calculate US Sales Tax

Now for the practical steps of how to calculate sales tax according to your sale!

  1. Confirm the state-wide tax rate for your product, plus any local rates that might apply.
  2. Start with the base product price. Let’s say it costs $10.
  3. Calculate the state-wide tax.
    If the tax rate is 7.5%, multiply the product price by .075. = 75 cent tax
    (Or if the tax rate is 10%, multiply the product price by .1. = $1 tax)
  4. Calculate the other local tax rates, if needed.
    Same as above. If the rate is 2.3%, multiply the price by .023. = 23 cent tax
  5. Finally, add the amounts from step 3 and 4 to the base product price.

         + .75 state tax rate 7.5%
         + .23 local tax rate 2.3%

Be sure to list each tax line separately so your customer (and tax authorities) can clearly see your calculations. That’s it!

If you'd like to experiment with different zip codes and base prices, try out the free Quaderno sales tax calculator.

Note: At Quaderno we love providing helpful information and best practices about taxes, but we are not certified tax advisors. For further help, or if you are ever in doubt, please consult a professional tax advisor or the tax authorities.