Taxes on Goods and Services: A State by State Guide

As a freelancer or small business owner, you are responsible for charging applicable taxes when invoicing your clients. There are three principal categories of taxes that may apply to goods and services: sales tax, value added tax (VAT), and shipping tax. The rules vary by state and by country.

How Do Taxes on Goods and Services Work?

Governments require sellers to charge taxes on certain transactions. Any taxes collected are due to the government when the seller files taxes (a process called remitting). To be in compliance with tax requirements, you may need to obtain a seller’s permit for your business and add tax charges to your invoices for all relevant goods and services.

Should You Charge Sales Tax On Your Invoices?

When it comes to sales tax, there is no one-size-fits-all rule. Sales tax, calculated as a percentage of the price, depends on the location where the sale takes place, the type of goods being sold, and the type of business entity under which the seller is operating.

In general, sales tax is likely to be required on the sale of physical goods (though several exceptions apply). Services and digital products come with their own sets of sales tax rules. It’s important to research the relevant laws in your state to find out what sales taxes you should be adding to your invoices. Use TaxJar to find a sales tax by zip code and head to your state government’s website to research local requirements.

Sales Tax Rates (U.S.)

STATE	SALES TAX	SOURCE
Alabama	4%	§ 40-23-2(1), § 40-23-61(a)
Alaska	No sales tax	N/A
Arizona	5.6%	Arizona Dept. of Revenue
Arkansas	6.5%	Arkansas Dept. of Finance and Administration
California	7.25%	California Dept. of Tax and Fee Admin.
Colorado	4%	Colorado Dept. of Revenue Taxation Division
Connecticut	6.35%	Connecticut Dept. of Revenue Services
Delaware	No sales tax	N/A
Florida	6%	Florida Dept. of Revenue
Georgia	4%	Georgia Dept. of Revenue
Hawaii	4% (General Excise Tax)	Hawaii Dept. of Taxation
Idaho	6%	Idaho State Tax Commission
Illinois	6.25%	Illinois Revenue
Indiana	7%	Indiana Dept. of Revenue
Iowa	6%	Iowa Dept. of Revenue: Sales and Tax Guide
Kansas	6.5%	Kansas Dept. of Revenue
Kentucky	6%	§ 139.200
Louisiana	4.45%	Louisiana Dept. of Revenue
Maine	5.5%	Maine Revenue Services
Maryland	6%	Comptroller of Maryland
Massachusetts	6.25%	Massachusetts Sales and Use Tax
Michigan	6%	§ 205.52
Minnesota	6.875%	Minnesota Dept. of Revenue
Mississippi	7%	Mississippi Dept. of Revenue
Missouri	4.225%	Missouri Dept. of Revenue
Montana	No sales tax	N/A
Nebraska	5.5%	Nebraska Sales and Use Tax
Nevada	6.85%	Nevada Dept. of Taxation
New Hampshire	No sales tax	N/A
New Jersey	6.625%	New Jersey Division of Taxation
New Mexico	5.125% (Gross Receipts Tax)	Taxation & Revenue New Mexico
New York	8.875%	NYC Dept. of Finance
North Carolina	4.75%	North Carolina Dept. of Revenue
North Dakota	5%	North Dakota Tax
Ohio	5.75%	Ohio Dept. of Taxation
Oklahoma	4.5%	Oklahoma Tax Commission
Oregon	0%	Oregon Dept. of Revenue
Pennsylvania	6%	Pennsylvania Dept. of Revenue
Rhode Island	7%	Rhode Island Dept. of Revenue Division of Taxation
South Carolina	6%	South Carolina Dept. of Revenue
South Dakota	4.5%	South Dakota Dept. of Revenue
Tennessee	7%	Tennessee Dept. of Revenue
Texas	6.25%	Comptroller of Texas
Utah	4.85%	Utah State Tax Commission
Vermont	6%	Vermont Dept. of Taxes
Virginia	5.3%	Virginia Tax
Washington	6.5%	Washington Dept. of Revenue
West Virginia	6%	West Virginia State Tax Dept.
Wisconsin	5%	Wisconsin Dept. of Revenue
Wyoming	4%	Wyoming Dept. of Revenue

Are Services Taxed?

Taxes may apply to services based on the service provider’s location. The majority of states do not broadly apply taxes to services the way sales tax is charged on tangible goods, though local rules may vary depending on the type of service. Only four states require taxes to be collected on general services:

• Hawaii – 4% (tax.hawaii.gov)
• New Mexico – 5.125% (avalara.com)
• South Dakota – 4.5% (dor.sd.gov)
• West Virginia – 6% (tax.wv.gov)

Value-Added Tax (VAT) by Country

Most countries require something called the Value-Added Tax (VAT) to be charged on certain categories of services. Use Avalara to find the VAT for your country and to find out whether it’s required for your particular service.

State	Is Shipping Taxed?	Source
Alabama	Not subject to sales tax if the shipping charges are listed separately on the invoice.	Admin Code 810-6-1-.178
Alaska	No sales tax.	N/A
Arizona	Not subject to sales tax. Handling charges are taxed. If shipping and handling, the entirety is taxed.	Admin Code § R15-5-133
Arkansas	Subject to sales tax.	GR-18
California	Not subject to sales tax if the shipping charges are listed separately on the invoice.	Publication 100 (Shipping and Delivery Charges), Article 12 Regulation 1628
Colorado	Not subject to sales tax if the shipping charges are listed separately on the invoice.	Colorado Sales Tax Guide (Page 10)
Connecticut	Subject to sales tax.	Page 13 of IP-2018(5)
Delaware	No sales tax.	N/A
Florida	Not subject to sales tax if the shipping charges are listed separately on the invoice.	Sales Tax Rules 12A-1.045, FAQ from FL Dept. of Revenue
Georgia	Subject to sales tax.	§ 48-8-2(34)(A)(iv)
Hawaii	Subject to sales tax.	§ 237-3
Idaho	Not subject to sales tax if the shipping charges are listed separately on the invoice.	tax.idaho.gov (Retailers), § 63-3613(b)(7)
Illinois	Subject to sales tax.	Nancy Kean vs Wal Mart Stores Inc., § 130.415(b)(1)(D)(ii)
Indiana	Subject to sales tax.	§ 6-2.5-1-5(a)(4), Sales Tax Information Bulletin #92
Iowa	Not subject to sales tax if the shipping charges are listed separately on the invoice.	tax.iowa.gov (Sales and Use Tax Guide)
Kansas	Subject to sales tax.	Sales Tax and Compensating Use Tax (Page 15), § 79-3602(ll)
Kentucky	Not subject to sales tax if the shipping charges are listed separately on the invoice.	Kentucky Sales Tax Facts (Page 2), KRS 139.010(15)(a)(4), KRS 139.210
Louisiana	Not subject to sales tax if the shipping charges are listed separately on the invoice.	RS 47:301(3)(a), Revenue Ruling No. 01- 007
Maine	Not subject to sales tax if the shipping charges are listed separately on the invoice.	Title 36, § 1752(14), Business Guide to Sales, Use, and Service Provider Tax
Maryland	Not subject to sales tax if the shipping charges are listed separately on the invoice.	COMAR 03.06.01.08
Massachusetts	Not subject to sales tax if the shipping charges are listed separately on the invoice.	Directive 04-5, Directive 98-5
Michigan	Subject to sales tax.	§ 205.51(1)(d)
Minnesota	Subject to sales tax.	§ 297A.61(7)(a)
Mississippi	Subject to sales tax.	Dept. of Revenue FAQs, Mississippi State Tax Commission Part IV Sales and Use Tax (Pages 16-17)
Missouri	Not subject to sales tax if the shipping charges are listed separately on the invoice.	Senate Bill No. 16
Montana	No sales tax.	N/A
Nebraska	Subject to sales tax.	§ 77-2701.35, Nebraska Sales and Use Tax Guide on Delivery Charges
Nevada	Not subject to sales tax if the shipping charges are listed separately on the invoice.	NAC 372.101, NRS 360B.480, NRS 360B.290(2), Tax Bulletin SUT 15-0002
New Hampshire	No sales tax.	N/A
New Jersey	Subject to sales tax.	Publication ANJ-10, Notice: Sales and Use Tax Rate Change, Bulletin S&U-4, § 54:32B-2(oo)(1), Admin. Code § 18:24-27.2
New Mexico	Subject to sales tax if the Seller is making the payment to the carrier. In other words, shipping is almost always taxable.	N.M. Code R. § 3.2.1.15(D)
New York	Subject to sales tax except for grocery food	§ 1101(a)(b)(3), § 1115(n)(3)
North Carolina	Subject to sales tax.	§ 105-164.3(203), Sales and Use Tax Bulletins (Page 83), North Carolina Dept. of Revenue FAQs
North Dakota	Subject to sales tax.	§ 57-39.2-01(7), § 81-04.1-01-10 (Page 6)
Ohio	Subject to sales tax.	§ 5739.01(H)(1)(a)(iv), § 5703-9-52
Oklahoma	Subject to sales tax.	§ 710:65-19-70, 68, § 1352(12.a)
Oregon	No sales tax.	N/A
Pennsylvania	Subject to sales tax.	61 Pa. Code § 54.1 , Pennsylvania Dept. of Revenue FAQ
Rhode Island	Subject to sales tax.	§ 44-18-12(a)(iv), Regulation SU 07-33
South Carolina	Subject to sales tax.	§ 117-310, Dept. of Revenue (FAQs)
South Dakota	Subject to sales tax.	Rule 64:06:02:34, South Dakota Dept. of Revenue (Publication)
Tennessee	Subject to sales tax.	§ 67-6-102 , 1997 Letter Ruling #97-22, Dept. of Revenue FAQs,
Texas	Subject to sales tax.	Sec. 151.007, Texas Comptroller FAQs
Utah	Not subject to sales tax if the shipping charges are listed separately on the invoice.	§ 59-12-102(103)(c)(ii), Tax Commission FAQs
Vermont	Subject to sales tax.	§ 9701(4)(A), Dept. of Taxes FAQs
Virginia	Not subject to sales tax if the shipping charges are listed separately on the invoice.	23VAC10-210-6000(A)
Washington	Subject to sales tax.	§ 82.08.807, WAC 458-20-110(3)
West Virginia	Subject to sales tax.	§ 11-15B-2(49)(A)(iv), § 110-15-89 (Page 142)
Wisconsin	Subject to sales tax.	§ 77.51(15b)(b)4, Dept. of Revenue FAQs
Wyoming	Not subject to sales tax if the shipping charges are listed separately on the invoice.	§ 39-15-105(a)(ii)(A), Dept. of Revenue (Freight and Transportation Charges)

How to Add Tax to Your Invoice

Our online invoice generator calculates taxes, subtotals, and totals automatically based on the percentage rate inputted. This keeps your records clean and shows your client exactly what they’re paying. The optional tax add-on can be customized for each line item in the invoice. Simply select the “Tax” option alongside each line item, label the tax (e.g. “CA Sales Tax”), and add the percentage rate.