Do You Charge Sales Tax on an Invoice? A US Guide (2026)

You've finished the work, you're filling in the invoice, and you reach the tax line. Do you add sales tax or not? For anyone selling in the United States, this is one of the most confusing questions in invoicing, because there is no single national answer. Whether you charge sales tax depends on what you're selling, which state your customer is in, and whether you have a tax obligation — “nexus” — in that state. Here's how to work it out without guessing.

The US has no national sales tax

Unlike most of the world, the United States has no federal sales tax and no VAT. Federal taxes — income tax and self-employment tax — go to the IRS and have nothing to do with the tax on your invoice. Sales tax is run entirely by the states, and 45 states plus the District of Columbia charge one, each with its own rates and rules. That's why no blanket answer exists: “US sales tax” is really dozens of separate systems. The IRS Small Business and Self-Employed center covers your federal obligations; sales tax sits with each state's Department of Revenue.

Do you even need to charge it?

Three questions decide whether sales tax belongs on a given invoice:

• Is what you sell taxable? Physical goods are taxable in almost every state. Professional and freelance services often aren't — but some states tax specific services, and digital products or software can go either way.
• Where is the customer? Sales tax generally follows the “ship-to” location — your customer's address — not yours. The rate is the one that applies where they receive the goods or service.
• Do you have nexus in that state? You only have to collect a state's sales tax if you have a connection (“nexus”) there. No nexus, no obligation to collect — though the customer may still owe use tax directly.

Goods vs services

The single most useful rule of thumb: tangible goods are usually taxable, and many services are not — but “many” is not “all”. A growing number of states tax certain services such as repairs, data processing, or digital subscriptions, and the lines move every year. If you sell a service, don't assume it's exempt; look it up on your state's Department of Revenue site or ask a tax professional, because getting it wrong means either undercharging — and owing the tax yourself — or overcharging your client.

Nexus and the Wayfair rule

“Nexus” is the connection that obliges you to collect a state's sales tax, and it comes in two forms. Physical nexus is the old rule: an office, employees, or inventory in a state. Economic nexus is the newer one. After the 2018 Supreme Court decision in South Dakota v. Wayfair, states can require even out-of-state sellers to register once their sales into the state cross a threshold — South Dakota's own limit, which the case upheld, was US$100,000 in sales or 200 transactions in a year. Most states adopted similar figures, so a high-volume online seller can owe sales tax in states they've never set foot in.

The states with no sales tax

Five states have no statewide sales tax, remembered by the acronym NOMAD: New Hampshire, Oregon, Montana, Alaska and Delaware. There's a catch — Alaska has no state sales tax but lets local municipalities charge their own, so a sale there still isn't always tax-free. And being based in a NOMAD state doesn't exempt you from collecting another state's tax if you have nexus there.

How to show sales tax on an invoice

1. 1Register first. Before you collect a cent of sales tax, get a sales-tax permit from the state. Collecting without registering is itself a problem.
2. 2Use the right rate. Apply the combined state-plus-local rate for the customer's location, not yours. Rates vary even between neighbouring towns.
3. 3Show tax on its own line. List the subtotal, then sales tax as a separate line with the rate stated, then the grand total — never bury tax inside the prices.
4. 4Keep records and remit on time. The tax you collect isn't income; you're holding it for the state and must file and pay it by the due date.

If you're a freelancer selling services, there's a fair chance you don't charge sales tax at all — but “probably not” is not a filing position. Confirm how your state treats what you sell, register if you need to, and when in doubt check with your state's Department of Revenue or a tax professional. Once you know your rule, the invoice itself is easy: the US invoice generator adds a clear tax line and totals it for you.