Sales Tax
Definition
A state and local tax on retail sales that the seller collects from the customer and sends to the state. Online sellers must collect it in states where they have nexus, unless a marketplace collects it for them.
Want a deeper explanation?
Formula
Sales Tax Collected = Taxable Sale Amount × Combined State and Local RateSales tax you collect is never your money. It belongs on the balance sheet as a liability until you file and pay, not in revenue.
Each state has its own rates, product rules and filing schedule, so most multi-state sellers use automation software. Watch for: sales tax included in your revenue numbers, which inflates sales and makes margins look lower than they are.
Example
A $100 order shipped to a customer in a state where you have nexus, at a combined 8.25% rate, means collecting $8.25 and filing it with that state.