Origin vs destination sales tax. This guide lays out which states adhere to each method.

Origin vs destination sales tax That means you collect sales tax based on your customer’s state and local tax rates. Written by Tom (30/05/2025) Reviewed by Adam Lee (24/11/2025) Aug 2, 2023 · To start, it’s important to understand how sales tax rates are determined and what rate you should charge customers in the state where your business is located (intrastate sales). Destination Sales Tax: Understanding the Crucial Difference Sales tax, a ubiquitous part of modern commerce, can be a complex beast. See Public Act 103-983. We'll also cover the process for handling sales tax exemptions and what to do if you lose an exemption certificate. Origin-sourced sales are taxed where the seller is located, while destination-sourced sales are taxed at the location where the buyer takes possession of the item sold. In-state sales (shipped or delivered): Tax is based on destination Over-the-counter sales: Tax is based on your business location So if a customer walks into your shop in Santa Ana, they pay your In others, taxes are based on the location of the buyer and the destination of the sale (destination-based sourcing). 3362 goes into effect which makes certain Illinois retailers responsible for destination-based sourcing for sales tax purposes. Nov 17, 2022 · In other words, California’s online sales tax, while mostly origin-based, is technically a hybrid of origin and destination-based. The local sales tax revenue will go to the city of Darrington even though the store is in Bothell. If you are selling to customers in a state where you don’t have nexus, you don’t have an obligation to collect sales taxes. This means that sales tax can be collected based on where the seller is located or where the How origin vs. But in a reaction to e-commerce, a number of states have move For those familiar with Amazon and sales tax collection – a question for you. Learn about destination-based, origin-based, and mixed sourcing approaches in US indirect tax automation. Dec 18, 2019 · Origin-based sales tax means you must charge the rate from your business’ physical location; destination-based means you must charge the rate where your product is shipped. Destination-Based Sales Tax California is a hybrid state when it comes to sales tax sourcing. This webpage does not pertain to sales subject to “origin-based” sales tax. e. One of the key areas to know when it comes to sales tax is “sourcing,” which means the location where a sale is taxed. What happens when Amazon ships a product from Texas to, for example, New Jersey… who would the tax Origin-based vs. Learn whether it’s origin or destination-based and how buyer location impacts your business. Origin-based sales tax is charged based on the location of the business, while destination-based sales tax is determined by the buyer's location or the "shipped to" address. The destination sales tax is a change for businesses that deliver merchandise in Washington. Oct 31, 2025 · California has two types of sales tax rates: origin-based vs destination-based. The Feb 23, 2014 · New Mexico is an origin-based tax state, and Colorado is a destination-based tax state. Understanding its nuances, especially the difference between origin-based and destination-based sales tax, is crucial for businesses, especially those operating online or across state lines. To determine this, find out if your online business is located in an origin-based or destination-based state, a concept called “sales tax sourcing. For example, if a Darrington resident purchases a couch from a furniture store in Bothell and requests home delivery, the sales tax will be based on the rate in the city of Darrington. This guide lays out which states adhere to each method. Aug 2, 2023 · To start, it’s important to understand how sales tax rates are determined and what rate you should charge customers in the state where your business is located (intrastate sales). Even if you deliver goods to your customers in your own vehicle, FOB could save the buyer from paying sales taxes on your delivery charge. Feb 26, 2025 · A directory of the states that are origin based sales tax vs destination sales tax. You also remit the tax to your customer’s state and locality. This distinction can have significant implications for how businesses calculate, collect, and remit May 2, 2025 · Origin vs. If that leaves you confused to no end, read on. Note: Effective January 1, 2025, retailers previously obligated to collect and remit Illinois Use Tax (UT) on retail sales sourced outside of Illinois and made to Illinois customers are subject to destination-based sales tax. Origin-based sales tax charges rates based on seller location, impacting in-state and out-of-state sales differently. Nov 10, 2015 · In that case, the buyer generally will not have to pay sales taxes on the shipping costs, since most states exempt freight charges paid directly to carriers from sales tax. This video explains the definitions of each Here's a map of the US that tells you what states are origin-based sales tax states and which are destination-based sales tax states. What is the answer here when it comes to sales tax (aka gross receipts tax in NM)? Dec 3, 2024 · Sales Tax Sales tax is a transactional tax imposed on the retail sale of tangible personal property (TPP) and specifically enumerated services. To determine this, find out if your online business is located in an origin-based or destination-based state, a concept called "sales tax sourcing". com What is sales tax sourcing, and how does knowing if your state is "origin-based" or "destination-based" affect your sales tax collection? Nov 8, 2022 · If you're a small business owner, you likely collect and remit sales tax. B. ‍ This means if you're selling from California to a customer in Texas, you'll charge Texas sales tax rates, including any applicable local taxes for the buyer's specific city or county. Jun 13, 2025 · Note: For interstate sales, origin-based rules don’t apply; if the buyer is out-of-state, then either destination-based rules apply or the sale is exempt from origin state tax. Destination-based sales tax, as opposed to origin-based sales tax, is a taxation system where the tax rate is determined by the location of the buyer rather than the seller. Jan 30, 2017 · Understanding the difference between origin-based sales tax and destination-based sales tax is crucial for businesses. Here's how the different rules apply across the 50 states! Oct 10, 2023 · Understand the difference between origin-based and destination-based state sales tax rules. Aug 22, 2016 · When small businesses aren’t aware of the nuances of sales tax law, they can increase their chances of audit, fines and repayment. For example, in Alpine, Utah, a business charges a consistent tax rate to all customers, regardless of their location. But Colorado allows home rule, and it doesn’t collect or administer sales tax for more than 70 self-collecting jurisdictions in the state. May 30, 2025 · Origin-based tax is a sales tax system in the United States where the tax rate is determined by the seller's location, meaning that sales tax is collected based on where the product or service is sold rather than where it is delivered, impacting businesses and consumers differently across various states. Out of the four parts to the equation, three come from the home state (California state, county, and city). other states which tax based on where the item ships TO (ie: DESTINATION STATES): Example of an ORIGIN state is Texas or California. Understand how ship-from/ship-to locations affect sales and use tax, economic nexus implications, and leverage AI to auto-detect addresses and enforce accurate rates. Understand the difference between origin vs. Dec 18, 2023 · Understanding the distinction between destination-based and origin-based sales tax is vital for businesses operating across different states. Arizona is an origin-based state. May 20, 2022 · Find out the difference between destination-based and origin-based sales tax rules, which states apply origin-based rules, and how those rules differ. Origin vs. However, the method for determining where this tax is collected and paid varies by state. As I understand these terms, NM will consider this sale to have taken place in NM while CO will consider this sale to have taken place in CO. Origin-based sourcing uses the seller’s location, while destination-based sourcing is based on the buyer’s location. A fundamental aspect of sales tax compliance is understanding the difference between origin-based and destination-based sales tax rates. This is where the concepts of origin-based and destination-based sales tax come into play. Businesses must carefully evaluate these methods, as they affect tax rates, compliance requirements, and reporting procedures. This means that sales tax can be collected based on where the seller is located or where the buyer is located, and is determined by zip codes. Because even without a sales tax nexus, businesses may still be required to collect sales tax when selling to clients in destination-sourcing states. Here's how the different rules apply across the 50 states! Sep 19, 2016 · September 19, 2016 The Difference Between Origin and Destination Sales Tax As a seller, it is important to know whether you are located in an origin-sourced state or a destination-sourced state What's the difference between origin-based and destination-based sales tax sourcing? Find out, plus a list of states by sourcing method. This levy can be a combination of state, county, city, and district tax rates. Feb 19, 2019 · Once registered, retailers must collect the state sales tax and all state-collected local and special district sales taxes in effect at the destination of the sale. In this case, sales will generally be destination-based. The more sales that are conducted by a company and the more Jun 5, 2025 · Origin-based sourcing determines sales tax based on the seller's location, while destination-based sourcing applies tax according to the buyer's location. In origin-based states, taxes are calculated based on the location of the business, while destination-based states tax according to the location of the customer. Origin/destination sourcing rules work differently if you are a remote seller, meaning you are based in one state and are selling into another state where you have nexus (an obligation to collect sales tax). The page you're looking for couldn't be found The California Sales Tax Handbook provides everything you need to understand the California Sales Tax as a consumer or business owner, including sales tax rates, sales tax exemptions, and more. destination-based sales tax—what does it mean for your purchases? Discover how the tax rules change depending on where a sale starts and whe 2 days ago · How to Pay Sales Tax: A Step-by-Step Guide Comprehensive guide to sales tax compliance: determine your obligation, register, calculate complex rates, file returns correctly, and maintain essential records. Learn how origin-based and destination-based US sales taxes differ, so that your business is always charging the right tax rate to your American buyers. destination sales tax. See full list on taxjar. Sep 8, 2021 · In destination-based states, you might have to consider numerous tax jurisdictions and their impact on your sales tax obligations. Origin-sourced sales are taxed where the seller is located, while destinatio Sales tax, or the tax on sales, is a state-imposed levy applied to commercial transactions. Some states are ORIGIN states, ie: they tax based on where the item ships from vs. This means you’re responsible for applying the TPT rate determined by the ship-from address on all taxable sales. The more sales that are conducted by a company and the more Jan 27, 2025 · A big change to Illinois sales tax compliance took effect on January 1, 2025. Sales tax is a “trust fund” tax, i. destination sales taxes work May 30, 2025 · Articles > Glossary What Is Destination-Based Tax? Destination-based tax is a sales tax system in the United States where the tax rate is determined by the location of the buyer, meaning that sales tax is collected based on the destination of goods or services rather than the seller's location, ensuring compliance with local tax regulations. May 28, 2023 · In this section, we'll discuss whether North Carolina is an origin or destination sales tax state, which sales are subject to sales tax, and what is exempt. ‍ Most Oct 9, 2024 · Origin-based sales tax states Below is a list of all the applicable origin-based states, this means that as a business owner, you should impose sales tax to everyone in your home-base state, at the rate where your business is located. What is sales tax sourcing, and how does knowing if your state is "origin-based" or "destination-based" affect your sales tax collection? May 2, 2025 · Origin vs. Feb 13, 2024 · Learn about sales tax sourcing - what it means for a state to have destination-based sales tax or origin-based sales tax. . Let's delve into the specifics. , the seller collects tax from the customer on behalf of the jurisdiction and remits it to the taxing authority. Understanding state-specific regulations is crucial to ensure accurate tax collection and avoid penalties. Aug 6, 2025 · Understand California’s sales tax system. Aug 21, 2020 · The city, county, and state sales taxes are origin-based while district sales taxes are destination-based. There is no change When it comes to sales tax compliance, a term that can easily leave businesses scratching their heads, is “destination and origin-based sales tax”. This comprehensive guide will dissect the core differences Yes, it is an origin-based sales tax state where the state, county, and city taxes are based on the point where the sale originates with the seller, but district taxes are added based on the location of the buyer (destination-based). Aug 28, 2024 · Learn the key differences between origin-based and destination-based sales tax systems and how they impact pricing and tax compliance. Oct 22, 2025 · The complex world of sales tax presents many challenges for businesses, especially with the rise of e-commerce and the increasing complexity of state tax laws. The more sales that are conducted by a company and the more Destination-based method: do I charge sales tax for out-of-state customers? In a destination-based state, sales tax is collected based on the buyer’s location. Because many small businesses have such limited resources, this can hit them harder than it would for larger businesses. destination based sales taxes are important for online businesses to keep in mind. California is a hybrid-origin state that applies certain state and local taxes based on the origin of a transaction but also applies certain district level sales taxes based on the destination. Origin-sourced Jun 16, 2023 · Master sales tax sourcing rules. Configuring the sales tax calculation to identify the sales tax “sourcing,” which means the location where a sale is taxed. Sep 22, 2025 · Here, sales taxes at the city, county, and state levels are calculated based on the origin, but district sales taxes, which are additional local taxes, are determined based on the California has two types of sales tax rates: origin-based vs destination-based. In contrast to origin-based tax, destination-based tax is the tax rate depending on the destination of the products and services. Aug 27, 2024 · Effective January 1, 2025, a provision of Illinois S. Find out if the changes affect your business. This process can be categorized into origin-based and destination-based sourcing methods, influencing compliance requirements and tax obligations. Origin vs Destination Sales Tax Configuring the sales tax calculation to identify the sales tax “sourcing,” which means the location where a sale is taxed. Apr 8, 2013 · Should your sales tax be based on the origin or the destination of the transaction? Destination-based sales tax has been the way most jurisdictions have done sales tax for ages. May 30, 2025 · Sales tax sourcing refers to the determination of the jurisdiction responsible for collecting sales tax on transactions. What is Destination-Based Sales Tax? Destination-based sales tax requires businesses to charge tax rates based on where the customer receives the product or service, not where the seller is located. Sep 16, 2025 · Sales Tax Structure in California Origin-Based vs. Read more here. ” Oct 9, 2024 · Origin-based sales tax states Below is a list of all the applicable origin-based states, this means that as a business owner, you should impose sales tax to everyone in your home-base state, at the rate where your business is located. Jul 2, 2014 · Understanding the difference between origin and destination-based sales tax systems is crucial.