Understanding where and when your freelance business must collect sales tax requires navigating a patchwork of 50 state revenue departments, thousands of municipal tax districts, and evolving post-Wayfair economic nexus rules.
The NOMAD States: No Statewide Sales Tax
The acronym NOMAD refers to the five US states that do not impose a general statewide sales tax:
Table 12.1 details the specific rules and local tax exceptions in the five NOMAD states:
| State | Statewide Sales Tax Rate | Local Municipal Taxes Allowed? | Special Rules for Freelancers |
|---|---|---|---|
| New Hampshire (N) | 0.0% | No general local sales tax | Meals and rooms tax applies to hospitality, not freelance services. |
| Oregon (O) | 0.0% | No general local sales tax | Levies a Corporate Activity Tax (CAT) on commercial gross revenue exceeding $1M. |
| Montana (M) | 0.0% | Yes (Specific resort towns only) | Designated resort communities (e.g. Whitefish, Big Sky) levy 3% local resort taxes. |
| Alaska (A) | 0.0% | Yes (Over 100 Boroughs & Cities) | Municipalities like Juneau and Anchorage levy local sales taxes ranging from 2% to 7.5%. |
| Delaware (D) | 0.0% | No general local sales tax | Imposes a Gross Receipts Tax on business activity, but no point-of-sale tax. |
Economic Nexus Thresholds by State
Following the landmark 2018 Supreme Court ruling in South Dakota v. Wayfair, Inc., states can legally compel out-of-state businesses to collect sales tax if their sales into that state exceed statutory dollar thresholds or transaction volumes.
Table 12.2 compares economic nexus thresholds across major US commercial jurisdictions:
| State | Economic Nexus Dollar Threshold | Transaction Count Threshold | State Department of Revenue Source |
|---|---|---|---|
| California | $500,000 | None (Dollar threshold only) | California Dept of Tax and Fee Administration (CDTFA) |
| Texas | $500,000 | None (Dollar threshold only) | Texas Comptroller of Public Accounts |
| New York | $500,000 | And 100+ separate transactions | New York State Dept of Taxation and Finance |
| Florida | $100,000 | None | Florida Department of Revenue |
| Illinois | $100,000 | Or 200 separate transactions | Illinois Department of Revenue |
| Washington | $100,000 | None | Washington State Department of Revenue |
| Standard Majority (30+ States) | $100,000 | Or 200 separate transactions | State Departments of Revenue |
How Sourcing Rules Work: Origin vs. Destination Sourcing
When you are required to charge sales tax, what rate do you apply?
- Destination-Based Sourcing (Most States): Sales tax is calculated based on the location where the customer receives or benefits from the deliverable (the client's address).
- Origin-Based Sourcing (e.g. Texas, Pennsylvania, Ohio, Virginia): In-state transactions are taxed according to the seller's physical business location.
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Open Free Invoice ToolFrequently Asked Questions
Do I charge sales tax if my client is in another country?
Services and goods exported to international clients outside the United States are almost universally exempt from US state sales tax. The invoice should record 0% sales tax, and you should retain export documentation (such as proof of international wire transfer or foreign shipping manifests).
What happens if I fail to collect sales tax from a client?
If your state Department of Revenue audits your business and determines that your deliverables were taxable, you are personally liable for paying the uncollected tax out-of-pocket, along with substantial late payment penalties and interest.