Sales Tax

A tax applied to the sale of goods and services.

QUICK ANSWER

Sales Tax is a consumption tax imposed on the sale of goods and services, typically calculated as a percentage of the purchase price and collected at the point of sale.

In depth

Sales Tax is charged to customers at the time of purchase and collected by businesses on behalf of the government. In the US, sales tax rates vary by state and locality, and businesses are responsible for determining where they have tax obligations, known as nexus. For startups, especially SaaS and ecommerce companies, managing sales tax compliance can become complex as they scale across states. Proper tracking, collection, and filing are essential to avoid penalties and ensure compliance with regulations.