What do people actually ask about sales tax on Reddit?
Search r/smallbusiness, r/tax, r/Etsy, and r/ecommerce and the same five worries keep coming back. Do I owe sales tax in a state I've never set foot in? Does Etsy or Amazon already handle it for me? Why did my receipt show a weird rate? Should I deduct sales tax or income tax on my federal return? And is anyone going to audit me over this?
None of these are dumb questions. Sales tax in the US runs through more than 12,000 different city, county, and state jurisdictions, each with its own rate and rules. There's no single national answer, which is exactly why Reddit threads on the topic get long and contradictory.
Key Highlights
- 41 states use a $100,000 economic nexus threshold for remote sellers in 2026; 5 states set it higher.
- Marketplaces like Etsy, Amazon, and eBay collect sales tax on your behalf in every state that has one, but you can still owe registration and filing duties.
- The federal SALT deduction cap rose to $40,400 for 2026, which changes the math on deducting sales tax versus income tax.
- 5 states charge no statewide sales tax at all: Alaska, Delaware, Montana, New HampshireNew Hampshire Tax: 0.00%, and Oregon.
- Buying a car in a no-tax state doesn't avoid sales tax if you register it somewhere that has one.
Which states actually have the highest and lowest sales tax right now?
This is the most common jumping-off question on Reddit, usually from someone comparing a receipt to a friend's in another state. Rates vary more than most people expect, and the state rate alone doesn't tell the full story once local add-ons stack on top.
| State | State rate | Avg. combined rate | Note |
|---|---|---|---|
| Louisiana | 4.45% | ~10.11% | Highest combined rate in the country |
| Tennessee | 7.00% | ~9.55% | No income tax, so sales tax carries more weight |
| Arkansas | 6.50% | ~9.48% | Recently dropped its grocery sales tax |
| Alabama | 4.00% | ~9.29% | Local rates add the most of any state |
| CaliforniaCalifornia Tax: 7.25% | 7.25% | ~8.80% | Highest state-only rate, capped local add-ons |
| Alaska | 0.00% | ~1.76% | No state tax, but local jurisdictions can charge their own |
| Delaware | 0.00% | 0.00% | No sales tax at any level |
| Montana | 0.00% | 0.00% | No sales tax at any level |
| New Hampshire | 0.00% | 0.00% | No sales tax at any level |
| Oregon | 0.00% | 0.00% | No sales tax at any level; funds government through income tax |
Sources: Tax Foundation, 2026 midyear state and local rate data; Sales Tax Institute: July 2026. Local rates change monthly. Check your state's Department of Revenue for the exact rate at your address before filing.
Alaska has no state sales tax, but that's not the same as tax-free shopping. Over 100 Alaskan municipalities levy their own local sales tax, and several now require marketplace facilitators to collect it on their behalf. If a Reddit comment tells you Alaska is "sales tax free," it's only half right.
How do you back a sales tax amount out of a total price?
This comes up constantly from sellers reconciling a register total or a customer disputing a receipt. You don't need the original subtotal if you know the tax rate and the final price.
Example 2: Total $54.99 at a 6% rate → $54.99 ÷ 1.06 = $51.88 pre-tax, $3.11 tax.
Example 3: Total $850 at a 9.55% rate (Tennessee) → $850 ÷ 1.0955 = $775.90 pre-tax, $74.10 tax.
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How does sales tax nexus actually work for online sellers?
This is the question behind half the panicked Reddit posts from small e-commerce sellers. Nexus just means a state has decided your business has enough connection to it to require you to collect and remit its sales tax.
How do these rules play out for actual sellers?
Scenario 1: The Etsy seller who thinks Etsy handles everything
Situation
A jewelry maker sells $60,000 a year through Etsy and assumes she has zero sales tax obligations since Etsy calculates and collects tax at checkout.
Etsy is a marketplace facilitator, so it does collect and remit sales tax on her behalf in every state that requires it. But several states still expect her to register for a sales tax permit and file $0 returns for those marketplace sales, and if she ever sells directly off-platform (a craft fair, her own website), that revenue is entirely her responsibility to track and tax.
Key lesson: A marketplace collecting tax for you isn't the same as having no filing obligations. Keep the registration current and track non-marketplace sales separately.
Scenario 2: Buying a car in a no-tax state
Situation
A Washington resident drives to Oregon (0% sales tax) to buy a $35,000 truck, expecting to save over $3,000 in sales tax.
Washington charges use tax on vehicles registered in the state, calculated at the same rate as its sales tax, regardless of where the vehicle was purchased. The DMV collects it at registration. The Oregon trip saves nothing once the truck gets titled at home.
Key lesson: Sales tax follows where you register and use an item, not just where you swiped the card.
Scenario 3: The freelancer confused about services
Situation
A freelance web designer in Texas wonders whether she needs to charge sales tax on a $4,000 invoice.
Whether a service is taxable depends entirely on the state and the type of service. Most states don't tax professional services like design, consulting, or freelance writing, but a handful (Hawaii, New Mexico, South DakotaSouth Dakota Tax: 4.50%) apply broad-based tax that covers many services, and digital products and SaaS subscriptions are increasingly taxed even in states that otherwise exempt services.
Key lesson: Don't assume "services aren't taxed." Check the specific state and the specific service.
Scenario 4: The multi-channel seller who crossed a threshold without noticing
Situation
A supplement brand sells through its own Shopify site and through Amazon FBA. Combined, it crosses $100,000 in Illinois sales, split roughly evenly between the two channels.
Illinois counts gross receipts toward its threshold, and as of January 1, 2026, dropped its separate 200-transaction test entirely, so only the dollar figure matters now. Amazon already collects and remits tax on the FBA portion as a marketplace facilitator. But once the combined total (marketplace and direct sales) crosses $100,000, the seller has economic nexus and must register and collect on the direct Shopify sales too.
Key lesson: Marketplace sales usually count toward your nexus threshold even though the marketplace is the one remitting that portion of the tax.
What are the 2026 economic nexus thresholds by state tier?
| Threshold tier | States | Transaction test? |
|---|---|---|
| $100,000 (standard) | 41 states, including Illinois, PennsylvaniaPennsylvania Tax: 6.00%, Florida | Varies; Illinois removed its transaction test in 2026 |
| $250,000 | Alabama, MississippiMississippi Tax: 7.00% | No |
| $500,000 | California, Texas, New York | New York also requires 100+ transactions (an "and" test) |
| Dollar + transaction ("and" test) | New York, ConnecticutConnecticut Tax: 6.35% | Yes, both conditions required |
| No statewide threshold | Alaska (local only), Delaware, Montana, New Hampshire, Oregon | Not applicable |
Sources: Sales Tax Institute Economic Nexus State Chart; Avalara state-by-state nexus guide, compiled 2026. Confirm exact figures with each state's Department of Revenue before registering, since several states change thresholds with little notice.
Should you deduct sales tax or income tax on your federal return?
This question spikes on r/tax every filing season, and the answer changed materially for 2026. Under the One Big Beautiful Bill Act, the federal SALT deduction cap jumped from $10,000 to $40,000 for 2025 and $40,400 for 2026, with the cap phasing down for taxpayers whose modified adjusted gross income tops $505,000.
You itemize on Schedule A and can deduct state and local sales tax or state and local income tax, never both. The IRS gives you optional sales tax tables based on income, family size, and ZIP code, and you can stack the actual sales tax you paid on specified big purchases (vehicles, boats, aircraft, manufactured homes, or major home renovation materials) on top of the table figure.
| Factor | Sales tax deduction | Income tax deduction |
|---|---|---|
| How it's calculated | IRS optional table (income, family size, ZIP) plus actual tax on big purchases | Actual state/local income tax withheld or paid, from your W-2 and estimated payments |
| Best for | Residents of no-income-tax states, or anyone with a major purchase year | Residents of states with meaningful income tax rates |
| Documentation needed | Receipts for major purchases only; the table itself needs no receipts | W-2 Box 17/19 and estimated payment confirmations |
| 2026 SALT cap | $40,400 combined with property tax ($20,200 married filing separately) | Same $40,400 combined cap, shared with property tax |
| Can you combine both | No, it's either sales tax or income tax, never both, in the same year | No, same rule applies |
Sources: IRS Topic No. 503; Schedule A instructions, 2026 tax year. Run both numbers against your own withholding and receipts before choosing, since the better option depends entirely on your state and spending in a given year.
When the sales tax deduction wins
- No state income tax: residents of Texas, Florida, Washington, and other no-income-tax states have no income tax to deduct, so sales tax is the only SALT option available.
- A major purchase year: buying a vehicle or doing a large renovation can push actual sales tax paid above what your state income tax withholding would have been.
When income tax usually wins
- High state income tax states: residents of California, New York, or New JerseyNew Jersey Tax: 6.63% typically pay far more in income tax withholding than they would in sales tax.
- Standard deduction beats itemizing: with the 2026 standard deduction at $15,000 single and $30,000 married filing jointly, plenty of filers won't clear that bar even with the higher SALT cap.
Experten-Tipp — Ritu Sharma
Sales tax rules reset constantly, not once a decade. Nexus thresholds, marketplace facilitator laws, and the federal SALT cap have all changed within the past two years. Before you register in a new state or file your return, check that state's Department of Revenue site directly, not a two-year-old blog post or a Reddit thread, even this one.
What else comes up again and again on Reddit?
- Is shipping taxable?: It depends on the state and how the invoice is structured. States that tax shipping generally do so when it's bundled with a taxable item on the same line; separately stated shipping charges are exempt in many (but not all) states.
- Do I owe use tax if a seller didn't charge me sales tax?: Yes, in nearly every state. Use tax is the mirror of sales tax: if you bought a taxable item and weren't charged sales tax (a private sale, an out-of-state purchase), you generally owe the equivalent use tax directly to your home state.
- Can tourists get a sales tax refund?: Not federally, and only a small number of states or specific retail programs offer any point-of-sale exemption for foreign visitors. Most sales tax paid in the US by a visitor is simply not refundable.
- Why did my receipt show two different tax rates on one order?: Common with mixed carts: groceries or clothing taxed at a reduced or exempt rate next to fully taxable items, or an order shipped to a jurisdiction with a special district add-on that only applies above a certain price threshold.
- Do I need a sales tax permit in a state before I hit the nexus threshold?: No. Registering before you have nexus creates filing obligations you don't yet need, and some states will expect ongoing returns once you're in their system even during low-sales months.
- Does drop shipping change who owes the tax?: Often, yes. If you use a supplier to ship directly to your customer, the supplier may need a resale certificate from you to avoid charging you tax, and you're still the one responsible for collecting from the end customer if you have nexus in that state.
The single fastest way to lose track of nexus is lumping Amazon, Etsy, and your own website into one combined sales figure. Keep them in separate columns from day one. When a state's dollar threshold includes marketplace sales (most do), you'll be able to answer the question in seconds instead of digging through a year of platform reports at tax time.
What actually gets sellers in trouble?
The realistic risk is quiet, not dramatic: back taxes, penalties, and interest piling up after nexus was crossed and never registered. States don't retroactively apply new nexus rules before you crossed the threshold, but they can absolutely go back and assess what you owed once you did cross it and didn't act.
The other common trap is assuming a marketplace facilitator's collection covers everything. It covers tax collected on sales made through that specific platform. Direct sales through your own site, wholesale orders, and in-person events at trade shows or pop-ups are yours to track and tax on your own.
Why is US sales tax such a mess in the first place?
Blame the 2018 Supreme Court decision in South Dakota v. Wayfair. Before that ruling, a state could only require a business to collect its sales tax if the business had a physical presence there: a store, an office, an employee. Wayfair let states require collection based purely on economic activity, and every state with a sales tax adopted some version of an economic nexus law afterward.
That single decision is why a solo Etsy seller in Ohio can end up with theoretical filing obligations in dozens of states. Marketplace facilitator laws grew directly out of the same pressure, since states realized it was far easier to collect from a handful of large platforms than from hundreds of thousands of individual sellers.
Final verdict
Most sales tax questions on Reddit boil down to the same root issue: people assume one rule applies everywhere, and in US sales tax, almost nothing applies everywhere. Nexus, rates, service taxability, and even shipping rules shift state by state.
If you sell across state lines, the concrete next step is simple: pull your trailing 12-month sales by state, separate marketplace revenue from direct sales, and check that combined figure against each state's actual threshold, not the number you remember from a Reddit comment.
