There is no federal sales tax in the United States. Each state runs its own system — its own rates, its own exemptions, its own definitions of what counts as taxable. Forty-five states (plus Washington D.C.) have a general sales tax. Five states — Alaska, Delaware, Montana, New Hampshire, and Oregon — have no statewide sales tax (though some Alaska municipalities do).

For digital products and services, the patchwork of state laws is especially fragmented. A digital course sold to a customer in Texas might be taxable; the same course sold to a customer in California might not be. A SaaS product might be taxable in New York but exempt in Florida. There's no master list that makes this clean. This is the reality you're navigating.

Before the 2018 Supreme Court decision in South Dakota v. Wayfair, sales tax obligations for remote sellers were largely limited to states where you had physical presence — an office, employees, or inventory. That changed dramatically with Wayfair.

Now, most states have adopted economic nexus rules: if you sell enough into a state, you may have a sales tax collection obligation there — even if you've never set foot in the state. The most common thresholds are $100,000 in sales or 200 transactions within a state in a calendar year. Some states have lower thresholds.

This means a solopreneur selling digital downloads nationally could theoretically have nexus in dozens of states. Whether that nexus creates an actual sales tax obligation depends on whether the state taxes the specific product or service you're selling.

This is where it gets complicated. States fall into roughly three categories:

States that tax most digital products: Texas, Washington, New York, Pennsylvania, and several others tax digital products including ebooks, digital downloads, software, and streaming services. If you're selling these products and hitting economic nexus thresholds in these states, you likely need to collect and remit sales tax.

States with limited taxation of digital products: Many states tax some digital products but not others. A digital photograph might be taxable while a digital consulting report is not. The distinctions often come down to whether the product is considered "tangible personal property in electronic form" versus a service.

States that don't tax digital products: Several states, including California and Illinois, generally exempt most digital goods from sales tax (though SaaS and cloud services may be treated differently). California, notably, does not impose sales tax on digital downloads, though this is a nuanced area with ongoing legislative attention.

Here's a rough breakdown by category:

This table is a starting point, not a definitive legal reference. Always verify your specific product type in each state you're selling into.

Pure services — consulting, coaching, design work, copywriting — are generally not subject to sales tax in most U.S. states. States tax the sale of tangible goods, and most have historically excluded services from that framework. There are exceptions: Hawaii, New Mexico, and South Dakota tax most services. And the line between a "service" and a "digital product" is increasingly blurry in the SaaS world, which is why SaaS taxation is one of the most litigated areas of state tax law right now.

Here's the practical workflow:

Step 1: Determine nexus. Review your sales by state for the prior 12 months. If you've crossed a state's economic nexus threshold ($100,000 in sales or 200 transactions, typically), you have nexus there.

Step 2: Determine taxability. Research whether your specific product or service is taxable in that state. This often requires reading the state's Department of Revenue guidance or consulting a tax professional.

Step 3: Register with the state. Before you collect sales tax, you must register as a seller in that state. You can do this directly through each state's revenue department, or use a service like the Streamlined Sales Tax Registration System (SST) for the 24 states that participate.

Step 4: Collect tax. Update your checkout or invoicing system to collect the correct rate. If you use Shopify, WooCommerce, Stripe, or similar platforms, most have built-in sales tax calculation tools.

Step 5: File and remit. Each state has its own filing frequency (monthly, quarterly, or annually depending on your sales volume) and its own remittance portal. Missing a remittance deadline triggers interest and penalties.

For solopreneurs selling in a handful of states with modest volume, manual management may work. But once you're dealing with multiple states, multiple products, and growing transaction volumes, sales tax automation software becomes worth the cost. The major players are:

TaxJar (acquired by Stripe, integrates with most e-commerce platforms) Avalara (enterprise-focused, but has SMB tiers) Quaderno (strong for digital products and SaaS) These tools track your nexus in real time, calculate the correct tax rates at checkout, and generate ready-to-file returns for each state. The cost is typically $19–$99/month depending on transaction volume.

If you sell through platforms like Etsy, Amazon, Gumroad, Teachable, or Udemy, you may be off the hook for sales tax collection and remittance — because marketplace facilitator laws in most states require the platform to collect and remit sales tax on seller's behalf. This covers over 40 states as of 2025.

Check your platform's documentation to understand whether they're collecting sales tax on your behalf and in which states. If they are, you generally don't need to register or collect in those states for sales made through that platform. Sales you make through your own website or checkout remain your responsibility.

If you realize you had nexus in states where you weren't collecting sales tax, don't panic — but don't ignore it either. Most states offer Voluntary Disclosure Agreements (VDAs) that allow you to come forward, pay back taxes, and avoid the heaviest penalties. The lookback period under a VDA is typically limited to three to four years, compared to an indefinite lookback if the state finds you first.

Working with a sales tax attorney or CPA experienced in multi-state compliance is strongly recommended before pursuing a VDA.

Sales tax for digital products and online services is genuinely complex — not because the concepts are hard, but because 45 different states are writing the rules. The good news is that for most solopreneurs, the practical obligations are manageable once you understand your actual nexus footprint and product taxability. Start by auditing your sales by state. Know what you're selling and whether it's taxable where your customers live. And when volume justifies it, let automation software do the heavy lifting.

Not sure where your obligations start? Talk to a CPA or sales tax specialist who works with digital product businesses. The cost of a one-hour consultation is a fraction of the cost of back taxes, interest, and penalties.

Sales tax is only one piece of multi-state exposure — nexus and state tax obligations covers the income-tax side. If you sell subscriptions, your SaaS terms and payment processor reporting need to line up with how you collect.