Frequently Asked
Questions
Read through our FAQs or schedule a call with a global tax specialist.
What is Yonda Tax
We are a practical compliance solution for US sales tax. We help businesses through the complexities of selling in and across the US with expert advice to ensure you are fully compliant with state sales tax requirements.
Our services include the best Automated Sales Tax Software, Sales Tax Registering, Sales Tax Calculation, Sales Tax Return Filing & Integration and more!
How can Yonda help my sales tax?
At Yonda Tax, we can help you implement an automated sales tax solution that suits your needs with our Wingman service. We will assist you in registering for sales tax in your relevant states which can often be confusing.
Our sales tax calculation guide allows businesses to accurately set up a compliant tax amount when checking out online – saving you the hassle of manually calculating rates with each transaction. Combined with our automated filing and payment systems, we’ll ensure all transactions are managed appropriately.
What is “nexus” and how is it established?
Nexus refers to the obligation to comply with a state’s sales tax laws. It can be established through:
- Physical nexus: having a warehouse, office, employee, or inventory in a state
- Economic nexus: exceeding a certain threshold of sales revenue or transaction volume in that state (e.g., $100,000 in sales or 200 transactions per year, varying by state)
- Click-through or affiliate nexus: some states include online referrals or partnerships in their nexus rules
Once you have nexus in a state, you're required to follow a few important steps to comply with local tax laws. Here’s how it works:
- Register for Sales Tax: Your first action is to apply for a sales tax permit in the state(s) where you have nexus.
- Set Up Tax Collection: Once you have your permit, the next step is to start collecting sales tax for sales delivered to that state. This involves setting up your website or accounting system accordingly.
- File Tax Returns: You will need to file sales tax returns (monthly or quarterly). This involves reporting your sales and paying the tax you’ve collected.
By taking these steps, you'll ensure compliance with state tax regulations and avoid penalties.
What is Nexus?
Sales tax nexus defines the level of connection between a taxing jurisdiction (a state) and an entity (your business).
It is essentially the idea that if your business has a presence in a state, you are required to comply with that state’s specific sales tax laws.
Yonda Tax offers a complimentary Nexus assessment to help tackle your tax obligations across different states.
Which states have sales tax?
There are only 4 states across the US which do not impose sales tax – Delaware, Montana, New Hampshire, and Oregon.
Alaska does not have a state-wide sales tax but does allow towns and cities to levy sales taxes.
Every other US state has a form of state-wide sales tax.
What is Shopify Tax?
Part of Shopify’s settings is Shopify Tax which allows you to turn sales tax on in relevant states. Once you are registered in a state, you can activate that state in Shopify and automatically incorporate sales tax to your sales prices at checkout.
However Shopify Tax is flawed as it fails to help businesses register for sales tax or file tax returns. If you sell multiple products, the Shopify Tax setup is also rather complicated.
How can Yonda help with Shopify Tax?
By connecting Yonda with Shopify, we will take responsibility of importing your transactions when needed for filing returns or nexus analysis.
This removes the weight of doing so from the business owner and ensures a stress-free Shopify experience.
Which digital products require sales tax?
Digital products are intangible assets that are sold electronically, with no physical involvement. Generally most digital products are taxed across the US.
Services that are considered digital products include cybersecurity, apps, games, cloud models, streaming services and data storage.
Whether these products are subjected to sales tax can vary from state to state.
What are the different types of sales tax?
Sales tax in the US can be split into 3 categories: seller privilege tax, consumer tax, and retail transaction tax.
Seller privilege tax is enforced on retailers when making sales in the state.
Consumer tax is imposed on consumers making the retail purchase.
Retail transaction tax is added to the sales transaction as a combination of the other two taxes.
How do I know if I need to pay sales tax?
If you’re unsure on whether you are liable for sales tax, get in contact with us at Yonda where we will talk you through all your tax requirements.
Sales tax in the US can be a complicated system to understand, particularly with the state differences.
At Yonda, we’ll help you sell compliantly and confidently. Book a free consultation with us today.
Why should I choose Yonda as my sales tax partner?
With decades of eCommerce experience, we will do all the work for you. From sales tax permits, to filing returns and liaising with tax offices, here at Yonda Tax we are dedicated to assisting you with all your business taxation needs.
When working with us, you will have a dedicated account manager who will be available to answer all your questions and talk you through your obligations so all practicalities are understood.
Plus we have a network of global partners outside the US to help with additional fulfilment, accounting or customs requirements.
How do I become a Yonda Partner?
To become a Yonda Partner and get started with us, you will need to complete our short contact form filling in your name, email, company website, and address.
We will get back to you shortly after submitting the form with further information on how to proceed and help you with all your tax needs. It’s as easy as that!
What is sales tax and when does it apply?
Sales tax is a consumption tax levied atthe state (not federal) level in the United States on the sale of goods andsome services. It applies when a business has “nexus” (a legal connection) witha state, and makes taxable sales to customers in that state.
The key point about sales tax is that it isnot a tax you pay on your revenue or profits, but rather a tax you add ontoyour sales price, effectively making you a tax collector for the local taxoffice. For example, if your regular selling price is $10 and you have nexus ina state where the tax rate is 6%, you need to charge $10.60 – but you stillonly get to keep the $10, and must pay the 60c of tax to the taxauthorities.
What is “nexus” and how is it established?
Nexus refers to the obligation to complywith a state’s sales tax laws. It can be established through:
- Physical nexus: having a warehouse, office, employee, or inventory in a state
- Economic nexus: exceeding a certain threshold of sales revenue or transaction volume in that state (e.g., $100,000 in sales or 200 transactions per year, varying by state)
- Click-through or affiliate nexus: some states include online referrals or partnerships in their nexus rules
Once you have nexus in a state, you'rerequired to follow a few important steps to comply with local tax laws. Here’show it works:
- Register for Sales Tax: Your first action is to apply for a sales tax permit in the state(s) where you have nexus.
- Set Up Tax Collection: Once you have your permit, the next step is to start collecting sales tax for sales delivered to that state. This involves setting up your website or accounting system accordingly.
- File Tax Returns: You will need to file sales tax returns (monthly or quarterly). This involves reporting your sales and paying the tax you’ve collected.
By taking thesesteps, you'll ensure compliance with state tax regulations and avoid penalties.
How do I know if I need to register for sales tax in a state?
If you have a physical connection to astate – this includes having any physical premises or employees in-state. Ifyou have no physical presence, you are only required to register if you makesales into that state that are considered subject to sales tax, and your totalsales have exceeded that state’s revenue threshold.
For example, most states do not considerprofessional services subject to sales tax, so if you provide services tocustomers in such a state, you will never have to register. But all statesconsider the sales of most physical goods taxable. The state of Florida has anannual revenue threshold of $100,000. Therefore, if selling a taxable good,once your total sales to customers in Florida has reached $100k, this willtrigger nexus and you will only need to register at that time. All sales priorto reaching this nexus threshold will not need to include sales tax.
What is the difference between sales tax and use tax?
If a seller does not collect sales tax dueto lack of nexus, the customer may still owe use tax—aself-reported tax on taxable purchases made out of state. In practice, manycustomers don't report this, which is why some sellers voluntarily register andcollect sales tax to avoid creating a burden for their buyers.
How is sales tax calculated at the time of payment, checkout or invoicing?
Sales tax is destination-based in moststates, meaning it is calculated based on the customer’s shipping address.The applicable rate depends on:
- State base rate
- Local (city or county) rates
- Product taxability rules (e.g. clothing might be exempt in some states)
For example, if you sell shoes (which arefully taxable in California) into Beverley Hills (zip code 90210), you willneed to charge 6.25% (which is the state base rate) + 1% (Los Angeles Countyrate) + 3.25% (Local district rate) – so the total rate you need to apply is10.5% in this case,
Businesses can use:
- Native system settings. Many platforms and accounting systems have the functionality to calculate sales tax – often it simply need to be activated and set up correctly.
- If your native billing or invoicing system does not have such functionality, you have a choice between integrating with 3rd-party software via API to return the correct tax rate (based on product & shipping address) or incorporate a "rates database" into the back-end of your system and then configuring the system to look up to this database to return the right rate.
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What types of products or services are taxable?
Taxability varies by state and product type. Some general rules:
- Physical goods are generally taxable
- SaaS (Software as a Service) is taxable in some states, exempt in others
- Electronically downloaded content (EDC), like eBooks or software, may or may not be taxable
Wholesale transactions may be exempt, but resellers must provide valid exemption certificates
What’s the process to become sales tax compliant?
- Identify nexus: Assess where you have nexus (physical or economic). Ensure you factor in technical nuances, including which types of sales should be included in the nexus analysis (D2C, marketplace, B2B etc.) and the time period involved in assessing nexus (calendar year, previous 12 months etc.)
- Register: Apply for a sales tax permit in the states where you have nexus. This can be a simple online application form, or a more complicated form and information-request that needs to be mailed or faxed to the tax office. Therefore, the time periods involved in receiving a sales tax registration ranges from instant in some states, to 3-5 weeks in other states.
- Configure checkout: Ensure tax is correctly calculated and charged on all your sales transactions to that state. This should be based on the delivery address of your customer and the specific product you are selling.
- File returns: Submit tax filings where you report all relevant transactions. This includes taxable transactions in all cases, but in many states they will also expect you to report non-taxable transactions (like marketplace or wholesale transactions). The tax returns need to be filed periodically – monthly in the majority of states, or quarterly in others. (In limited cases, the sales tax filings can be submitted annually).
- Monitor ongoing: Track nexus in other states as your business grows
What happens if I have historic sales but wasn’t registered?
For the states where you created nexus historically, generally, you have options depending on the state(s) and timing involved:
• Back-dated registration (apply for a “start date” of when you should have started collecting tax). You will need to file back-dated returns going back to that period, and pay the tax you should have collected. Penalties and interest will apply, so this can be a big cash flow hit.
• Voluntary Disclosure Agreements (“VDA’s”). This is the same as the first option, but you make a special application to the state to request amnesty, and if successful, they won’t charge you penalties. (You still pay the tax + interest)
• Register going forward. This is often the most practical and commercially sensible option that many of our clients decide to do.
In summary, you may be liable for back taxes, penalties, and interest. Options include:
• Voluntary Disclosure Agreements (VDAs): Some states allow businesses to come forward voluntarily to limit liability and waive penalties
• Amnesty programs: Occasionally available for full or partial forgiveness
The most urgent matter is to get you up to date in any states where you are already registered. To regularise your tax position in newly registered states, two things will be required:
• Details of the state registrations (date, login information).
• The historic data. Your sales data for these states going back to the registration start date.
Once you have gathered this, you will need to file all the “back-dated” returns. You’ll need to pay over the tax you’ve collected, plus penalties and interest. If the penalties & interest are significant, you might consider applying for amnesty.
Do I need a US company to comply with US sales tax?
It is not a regulatory requirement to have a U.S. company, but there are benefits in doing so (Shopify will only pay out in USD if you have a US entity, Meta & TikTok won't allow non-US entities onto their platform). Therefore, many brands choose to establish a US entity.
Things you will need to consider if you decide to establish a company:
•The entity name & type - LLC is most popular, but some prefer a Corporation. You can read more here.
•The state of incorporation - Most choose the low-tax jurisdictions, with Delaware being the most popular, unless you have a special reason to set up in a specific state - for example, if you have any business connection to a state); and
•Ownership structure - you should consult your accountant or tax advisor for this.
Once established, there will be annual corporate tax filing requirements, so it's important that you implement the necessary internal bookkeeping processes. The annual filings are due in March/April each year.
Having said this, foreign entities can register for sales tax in any US state. You don’t need to incorporate in the US unless required by marketplaces (e.g., Meta, TikTok). However, having a US bank account that supports ACH debit is often needed to make payments to tax authorities.
How does VAT differ from US sales tax?
VAT is a value-added tax applied throughout the supply chain, common in the UK, EU, and many other countries. Unlike US sales tax, which is only charged at the final retail stage, VAT is:
- Charged on both B2B and B2C sales
- Recoverable by registered businesses
- Reported and paid via periodic VAT returns
When does VAT registration become necessary in the UK or EU?
You must register if:
- You store goods in a local warehouse or fulfilment centre
- You buy from local suppliers and resell in that country
- You act as the importer (e.g. in a drop-ship model where you are the consignee)
Even if not strictly required, voluntary registration may be beneficial for reclaiming import VAT.
What about tax in Canada?
Canada has a dual-layered tax system:
- GST (Federal)
- PST (Provincial) or HST (Harmonised sales tax)
Foreign businesses must register once taxable sales exceed CAD $30,000. Fulfilment location matters: shipping from outside Canada may exempt you, while domestic warehousing usually triggers obligations.
What are common sales platforms’ roles in tax?
- Amazon: In most states, Amazon remits tax on your behalf (Marketplace Facilitator rules)
- Shopify: Allows for sales tax calculation, but sellers must manage filing and payment
- Stripe: Stripe Tax offers tax calculation, but not full compliance services
- Other platforms (eBay, Etsy, etc.): Often handle tax collection, but sellers must understand what is still required
What are reseller certificates and how do they work?
A resale certificate allows you to buy items tax-free if you intend to resell them. Some states accept a uniform resale certificate, while others require a state-specific certificate. Suppliers may require proof before exempting you from tax.
How often are sales tax returns filed?
Filing frequency depends on state rules and sales volume:
- Monthly: Common for higher volume sellers
- Quarterly: Default for many small-to-medium sellers
- Annually: For low activity or new filers
Some states change your filing frequency after monitoring your business for a few months.
Can I automate my tax compliance process?
Yes. Most providers support:
- System integrations with Shopify, Amazon, Stripe, etc.
- Automated data import and return preparation
- Ongoing nexus monitoring
- Alerts when a state threshold is nearing
Manual uploads are also possible but require internal effort each month.
How should I compare tax providers?
The most important consideration when selecting a tax partner is for you to decide your level of involvement in the tax compliance process. There are effectively two approaches: the first option is a “DIY” model where you are ultimately responsible for preparing and filing tax returns and dealing with tax offices. These tax providers will allow you use their software to make this process more efficient, but the buck still stops with you. The other option is what is commonly known as “Managed Tax Compliance” – this is a classic outsourced option, where you tax provider is responsible for preparing and filing tax returns, and will handle all tax office communication on your behalf. If you don’t have the internal resources or expertise to take on the responsibilities of tax compliance in-house, a managed service approach is usually preferable – especially if the tax partner provides ongoing support from an experienced and knowledgeable account manager.
A summary of the important considerations when choosing a tax partner:
- Scope of service: Do they file returns, handle registrations, and provide support?
- Support level: Is it a self-service platform or fully managed with a human account manager?
- Automation: Do they integrate with your systems?
- Pricing: Flat monthly fee vs. usage-based pricing? Is filing per state charged separately?
- Risk coverage: Do they review filings? Assist with audits or historic issues?
What if I don’t comply with sales tax requirements?
If your business is selling goods or services in the United States and you don’t follow sales tax rules, there can be serious consequences. Sales tax isn’t optional — it’s a legal obligation. Even if you didn’t realise you needed to collect it, states can still hold you responsible.
1. You Could Owe Penalties and Interest
If you fail to collect and pay sales tax properly, the state can demand that you pay the tax that should have been collected — out of your own pocket. But it doesn’t stop there. They usually add penalties for non-compliance and interest on the unpaid amount. This can build up quickly over time and turn a small mistake into a big bill.
Example: You sell $100,000 of goods into California and don’t charge sales tax. If California finds out, they can make you pay that tax yourself — even though your customer already paid you the full amount. They’ll also likely charge interest and penalties.
2. You Might Get Audited by the State
States don’t take sales tax lightly. If they suspect you haven’t been collecting or filing properly, they can launch a sales tax audit. That means they’ll dig into your records — your invoices, bank statements, sales reports — and check for mistakes.
Audits are time-consuming, stressful, and expensive. And they often lead to even more back taxes, interest, and penalties being assessed. In some cases, states can go back several years to look for problems.
3. It Can Damage Your Reputation
If a state takes action against your business — especially if it becomes public — it can damage your brand and credibility. This is especially true in industries like ecommerce or SaaS, where customer trust is everything.
Even private issues (like customers being charged the wrong tax, or vendors being asked for last-minute certificates) can cause friction and raise questions about your professionalism.
4. It Can Hurt You During Fundraising, Sale, or Due Diligence
If you're planning to raise investment, sell your business, or go through any kind of due diligence, sales tax non-compliance can cause big problems.
Investors and buyers don’t want hidden risks. If a state could show up tomorrow and demand years of unpaid tax, that could reduce the value of your business — or even kill a deal entirely. It’s not uncommon for founders to have to set aside part of their exit money just to cover unexpected tax issues.
In Short...
Sales tax might seem like a small operational detail — but if you ignore it, the consequences can be costly, disruptive, and long-lasting. Thankfully, with the right tools and support, compliance doesn’t have to be hard. Staying on top of your obligations protects your business, your reputation, and your future.
What about income tax or corporate tax in the US?
- US sales tax compliance is separate from income tax
- A double tax treaty (DTT) between your country and the US may shield you from federal income tax, especially if you don’t have a permanent establishment
- Hiring employees or owning US assets may trigger further obligations
Sales tax is not affected by whether or not you pay income tax.
Do wholesale transactions trigger tax or nexus?
Wholesale transactions will not be subject to sales tax if your clients are re-selling the goods. (If you sell B2B and your customers are the end users of the product, this might be taxable). Therefore, you will not have to collect sales tax on your wholesale transactions. However, these sales ARE included in the nexus calculation in most states, and if you do register for sales tax in a state, you will have to report your wholesale transactions in the tax returns.
Wholesale (resale) transactions are typically exempt from sales tax but:
- Must be properly documented with resale certificates
- Are included in nexus thresholds in many states, even if not taxed
- Must be reported on your sales tax returns as exempt sales in most sales
Shopify does so much work for me – it tells me how much tax I’ve collected, isn’t it very easy to just file the tax return ourselves every month?
It is true that Shopify makes sales tax look simple on the surface - and for a handful of states, with straightforward products and no other sales channels, a Virtual Assistant or in-house resources might be able to keep up.
But in reality, your current approach only works if you're selling exclusively on Shopify. It won’t capture sales from Amazon, Etsy, retail, wholesale, or any where else - and tax offices require complete reporting across all channels.
Also worth noting: most state tax returns are not just a single number. In many states (e.g. California, Texas, Illinois), you need to report sales by taxing jurisdiction - and some forms have over 100 boxes to complete. In my experience (and I've literally done it manually!), a single return like Illinois can take several hours if done correctly. If you are filing in multiple states, it will take you several hours, and there's a good chance the data won’t be reported properly - which carries a real risk of audits or penalties down the line.
Shopify also doesn’t flag product-specific tax rules - like exemptions or reduced rates for clothing, food, medical products, or B2B sales. If you’re dealing with any of these, your team won’t be able to account for them unless they're manually checking state-by-state guidance every month (which is unrealistic).
These days, there are affordable software options that handle the entire process accurately and automatically, for just a few hundred dollars a month. Honestly, for the time saved and peace of mind, it's well worth it.
How does sales tax work
To understand how sales tax works, you need to think about it from two perspectives: when does sales tax apply to you, and what does it mean if you do have a sales tax obligation?
Sales tax only applies if your business has nexus in a state. Once you know you have nexus, the first step is to register your business with that state. This is known as “registration” or applying for a sales tax license. Once you’re registered, there are effectively two parts to the Sales Tax compliance process:
- Sales Tax Calculation. Adding the correct tax when you invoice customers in nexus states, based on delivery address and product type. Many systems have native sales tax functionality, others require an integration with a 3rd party to provide the tax rates.
- Tax Return Filing & Payment. Reporting the sales in monthly or quarterly tax returns, and paying the tax you’ve collected. To file returns, you need to ensure all the relevant commercial activity you did in that state can be reported electronically, including specific data required for submission. This includes transactional-level sales information (dates, amounts, product info, customer address info), and any credit notes or refunds. If your sales data is not in the right format, it’s impossible to file an accurate sales tax return. Once the return has been filed, you need to pay over the tax you have collected and reported.
Do I collect sales tax in all states?
No, you only have to collect sales tax on your transactions in states where you have nexus. You are not allowed to collect sales tax on your transactions until you have a sales tax license from that state – so technically, you should register immediately when you create a nexus, and then start adding sales tax to the relevant sales in those states only. You should then monitor your sales to all other states to ensure you are aware if you are approaching the nexus thresholds anywhere else.
What is the pricing ?
The pricing for sales tax differs depending on the service provider, software used and methodology. There are fundamentally two ways to deal with sales tax compliance: you can use software and do it yourself, or you can engage a third-party who can do it all for you. The second option is commonly called a “Managed Compliance Solution”, and it will usually be a combination of technology and human support.
A common way to price for the Managed Solution is to apply a Fixed Monthly Fee that covers the import and processing of your sales data, monitoring sales across all states, and preparing tax filings instates where you have nexus. In addition, there will be usually be a set fee per month for each state where you have nexus, which includes the submission of sales tax returns and dedicated account management for both technical and practical support.
If you want a third-party to apply for your sales tax license, they will most likely charge a once-off fee for sales tax registration.
Can I just do the registration?
Registering for sales tax is only the first step – unfortunately you can’t register only. The real obligations only kick in once you are registered – you’ll need to start charging tax on your sales into that state and file periodic tax returns where you report your sales and pay over the tax you have collected.
What does sales tax integration mean?
You need to think about integrations and API’s in two ways when it comes to sales tax compliance. The first is point-of-sale integration – the ability to connect your payments, invoicing or checkout systems to a sales tax provider’s system in order to calculate the applicable tax rate in real-time at the point of a transaction occurring.
The second could be referred to as a “data extraction” API or integration. In order to file tax returns, your tax provider will need all the relevant and eligible transactions that need to be reported in that filing. To get this data, it is ideal to be able to connect to your system of record – this could be an ERP, accounting system,, website or other transactions database or warehouse. Instead of integrating and performing actions in real-time when a transaction is created, this API needs to extract the data once it has been stored in the system of record. This could happen daily or periodically, but it could also be a single import at month-end or period-end. If your system of record is not able to connect to your tax provider’s system to perform this data extraction – you will probably have to do some kind of manual data upload.
How does the sales tax payment work?
Every month, you must pay the tax you have collected, but the states only accept payment from US-domiciled bank accounts that have ACH Debit.(Which means the money is taken automatically by the tax office). Some will accept credit cards, but this involves logging into the tax office website and manually paying each period. Therefore, it is important that you have a US bank account with ACH debit functionality.
Some tax providers offer tax payment services, where you can pay the tax you owe to your tax partner, and they will facilitate the payment to the tax office.
How do I reclaim import VAT?
What Is Import VAT, and How Does ItWork?
If your business buys goods from anothercountry and brings them into the UK (or into another country that has VAT),you’ll likely have to pay something called import VAT. This is a type of taxthat governments charge on goods as they enter the country.
It’s similar to the regular VAT you see ona shop receipt – but instead of being paid at the checkout, it’s paid whengoods cross the border.
Why Do I Have to Pay Import VAT?
Import VAT exists to make sure importedgoods are treated the same as goods bought locally. Without it, imports mightseem cheaper, and that wouldn’t be fair to businesses inside the country. Sothe government adds VAT to imported goods just like it does for local sales.
Example:
If you buy £10,000 of stock from the U.S.and bring it into the UK, you’ll usually have to pay 20% import VAT, or £2,000,at the border.
Who Pays It – and When?
You usually pay import VAT when the goodsarrive in the country. If you're using a shipping company or customs agent,they’ll often handle this for you and send you a bill or a form called a C79certificate (in the UK) showing how much VAT was paid.
In some cases, larger businesses can deferthe payment or use a system called Postponed VAT Accounting, which we’llexplain next.
Can I Get That Money Back?
Yes – in most cases, if you’re aVAT-registered business, you can reclaim import VAT. It’s treated just like anyother VAT you pay on business costs (like office supplies or software). You canclaim it back on your VAT return. You can then include that amount as “VATreclaimed” on your next VAT return.
What If I’m Not VAT Registered?
If your business isn’t VAT registered, youcan’t reclaim the import VAT. It just becomes part of your cost. For thatreason, most businesses that import goods register for VAT as soon as they can.
Speak to a US sales tax expert today