Guide · Sales tax
Sales tax nexus for freelancers
Sales tax is set by state and local governments, not by Washington. Whether you need to collect it depends on where you are, where the customer is and what you sell — and on a concept called nexus.
There is no federal sales tax
The US has no national sales tax. Individual states and some local governments set the rate, the rules and the exemptions. A freelancer in Texas selling to a client in California is dealing with two sets of rules, not one.
What nexus means
Nexus is the connection between your business and a state that gives that state the right to require you to collect tax. It is not a moral judgment and it is not the same as “doing business” for every purpose. It is a threshold test, and it varies by state.
Physical nexus
Physical presence is the traditional test: an office, an employee, a warehouse, inventory, or sometimes a contractor or sales rep in the state. If you work from home in the state, you generally have physical nexus there.
Economic nexus
After the 2018 South Dakota v. Wayfair decision, states can require collection based on sales volume, even without a physical presence. Many states use thresholds around $100,000 in sales or 200 transactions in the state in a year, but the numbers, the measurement period and whether services count vary. Some states count gross sales; others count taxable sales.
Services vs goods
Most states tax tangible goods. Services are a patchwork: some states tax certain services, some tax almost none, and the list changes. If you are a consultant, designer or developer, do not assume “services are not taxable” — check the state where the work is delivered and where the customer is.
Marketplace sales
If you sell through a marketplace, the platform often collects and remits the tax. That does not necessarily remove your own registration or filing obligations. Read the platform’s tax terms and keep your own records.
Registering and collecting
If you have nexus, you generally register with the state, collect the correct rate, file returns and remit the tax. Registration can trigger filing obligations even in months with no sales. Do not register on a guess — work out where you actually have nexus first.
A simple example
A designer in Texas sells a logo package to a client in Colorado. The work is a service, delivered remotely, and the designer has no office or employee in Colorado. Whether the sale is taxable depends on Colorado’s rules for that service and on whether the designer has economic nexus there. The designer should not add a tax line simply because the client is in another state; they should check the rules first.
What goes on the invoice
Show tax as its own line, with the rate and the amount. If a sale is exempt, note the reason and keep the exemption certificate. Never bury tax in the unit price; the customer cannot verify it and the state cannot audit it.
This is general information, not tax advice. Sales tax rules change and depend on facts. Ask an accountant or your state’s department of revenue before registering or collecting.
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