Whether you’re selling online, running a retail store or managing a service-based business, understanding sales tax is essential to staying compliant and avoiding costly penalties. But sales tax laws vary widely from state to state and what’s taxable in New Jersey may not be in Colorado.
“With complex and varying compliance rules across 45 states, U.S. sales tax can present a significant and burdensome barrier to successful trade in the U.S.” – U.S. Sales Tax Guide, Avalara
The guide breaks down the key rules and filing requirements for five major U.S. states: Pennsylvania (PA), New Jersey (NJ), New York State (NYS), Colorado (CO) and Tennessee (TN). From current tax rates to sales and use tax obligations.
Use the table of contents below to jump to your state or read on to understand the basics of how sales and use taxes work.
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Key takeaways for US sales tax guide:
Sales tax laws vary by state, with different rates, exemptions and filing rules across PA, NJ, NYS, CO and TN.
Both sales tax (charged at the point of sale) and use tax (self-reported on out-of-state purchases) may apply.
Economic nexus rules can require remote sellers to collect tax even without physical presence.
Filing frequency depends on tax liability thresholds and is managed via each state’s online portal.
Staying compliant across multiple states requires up-to-date systems and clear process tracking.
Try Pipedrive free for 14 days, simplify outreach, automate sales admin and keep your pipeline compliant.
What is US Sales Tax?
U.S. sales tax is a state-imposed tax collected at the point of sale on goods and certain services. Businesses are responsible for charging this tax to customers and then remitting it to the state.
Use tax, on the other hand, applies to purchases made without sales tax, typically from out-of-state or online sellers.
If a customer buys something from a business that doesn’t collect sales tax, they may be required to self-report and pay the equivalent use tax to their state.
For businesses, understanding both types is crucial. If you’re selling into multiple states (e.g. PA, NJ, NYS, CO and TN), especially as an online seller or remote vendor, you may be responsible for collecting and remitting tax even if your business isn’t physically located there.
“In 2023, there were more than 11,000 U.S. sales tax jurisdictions with varying rates, requirements and thresholds, making manual monitoring of sales and use tax rates and rules almost impossible without proper systems in place.” - Avalara analysis of U.S. sales tax complexity (Linda Handley)
Pennsylvania (PA) Sales Tax Guide
The Pennsylvania state sales tax rat`e is 6%, with certain local jurisdictions adding more on top. Specifically, Allegheny County imposes an additional 1% sales tax, while Philadelphia adds 2%, resulting in total rates of 7% and 8% respectively in those areas.
Businesses operating in or selling to Pennsylvania residents must understand both the base rate and applicable local taxes to remain compliant.
In Pennsylvania, most tangible personal property is subject to sales tax unless specifically exempted by law. Tangible personal property includes items like electronics, furniture, appliances and certain digital goods such as downloadable software and music.
However, Pennsylvania also offers several notable exemptions. For example, most clothing is exempt from sales tax, with the exception of accessories like jewelry, handbags and formalwear.
Groceries, prescription medications and educational materials such as textbooks are also tax-exempt, making the Pennsylvania sales tax system relatively favorable for basic necessities.
The state also enforces a use tax on taxable goods purchased outside of Pennsylvania and brought into the state for use, storage or consumption. If the out-of-state seller does not collect Pennsylvania sales tax at the point of sale, the buyer is responsible for reporting and paying use tax directly to the Pennsylvania Department of Revenue.
The rule applies to both consumers and businesses and is particularly relevant for online purchases or catalog orders.
Pennsylvania follows an economic nexus standard, which requires remote sellers with more than $100,000 in gross annual sales into the state to register and collect Pennsylvania sales tax, even if they have no physical presence within the state.
Sales tax filing frequency in Pennsylvania depends on the volume of taxable sales. Businesses with a tax liability exceeding $600 per month must file returns monthly.
According to the Pennsylvania Department of Revenue, Those with liabilities between $75 and $600 per month file quarterly and businesses with less than $75 in monthly liability can file annually.
All returns and payments are due by the 20th day of the month following the end of the reporting period. Businesses can register, file and pay sales and use taxes through the Pennsylvania Department of Revenue’s e-TIDES system.
New Jersey (NJ) Sales Tax Guide
New Jersey’s state sales tax rate is 6.625%, but that rate can be reduced in certain areas through programs like the Urban Enterprise Zone (UEZ), which allows qualified businesses to charge half the standard rate (3.3125%) on certain purchases made within the zone.
In New Jersey, most tangible personal property is taxable, including electronics, furniture and non-essential clothing. However, groceries, prescription medications and most clothing are exempt.
Notably, digital products such as downloaded music, e-books and streaming services are taxable in the state.
New Jersey also enforces a use tax for goods purchased out of state for use within NJ. If sales tax wasn’t collected at the point of sale, the buyer is responsible for remitting use tax to the state.
For remote sellers, New Jersey follows an economic nexus threshold of $100,000 in annual gross revenue or 200 or more separate transactions into the state. If either threshold is met, the seller must register to collect and remit NJ sales tax, even without a physical presence in the state.
The filing frequency for NJ sales tax returns is determined by the amount of tax collected. Businesses may be required to file monthly, quarterly or annually and returns are submitted through the New Jersey Division of Taxation online portal.
Stay compliant if you’re managing multi-state operations by checking for local exemptions, tracking thresholds and filing on time.
New York State (NYS) Sales Tax Guide
New York State imposes a base sales tax rate of 4%, but local jurisdictions (counties and cities) can add additional rates, bringing the total sales tax up to 8.875% in areas like New York City. The layered structure makes it essential for businesses to track location-specific rates when selling within the state.
Most tangible personal property is taxable in NYS, including electronics, furniture, appliances and digital goods like e-books and music downloads. Clothing and footwear under $110 per item or pair are exempt from the 4% state tax, though local taxes may still apply.
New York also applies a use tax on taxable items bought outside the state and used within it. This includes online purchases where no tax was collected. Businesses and individuals are expected to report and remit the use tax when applicable.
For remote sellers, NYS enforces economic nexus rules. Sellers with more than $500,000 in gross receipts from New York sales and 100 or more separate transactions in the previous four quarters must register and collect sales tax.
NYS also participates in the Marketplace Facilitator Law, requiring platforms like Amazon or Etsy to collect and remit tax on behalf of third-party sellers.
Sales tax filing frequency in New York is based on annual liability. According to the New York State Department of Taxation and Finance, “if you’re registered for sales tax purposes in New York State, you must file sales and use tax returns quarterly, part‑quarterly (monthly) or annually with the department”.
Vendors generally file quarterly, but higher-volume sellers may need to file monthly, while lower-volume businesses may qualify for annual filing.
Returns are submitted via the New York State Department of Taxation and Finance online services portal and filings are typically due by the 20th of the month following the reporting period.
Colorado (CO) Sales Tax Guide
Colorado has a state sales tax rate of 2.9%, but this is just the starting point. The state’s “home rule” system means that over 70 local jurisdictions (cities and counties) can set and collect their own sales taxes independently.
Most tangible personal property is taxable in Colorado, including physical goods like electronics, home goods and clothing. However, groceries, prescription drugs and some medical devices are exempt.
Colorado also imposes a use tax on goods purchased without sales tax from out-of-state sellers and brought into the state for use, storage or consumption. Businesses are responsible for reporting and paying this use tax if the seller did not collect Colorado sales tax at checkout.
Remote sellers are subject to economic nexus laws. If a business makes more than $100,000 in gross sales annually into Colorado, it must collect and remit sales tax, even without a physical presence.
Additionally, Colorado enforces destination-based sourcing, meaning tax is applied based on the buyer’s location, not the seller’s.
Due to the home rule structure, sellers must determine whether they are required to collect state-administered taxes, local taxes or both. The Colorado Department of Revenue administers most state and local sales taxes through the Sales & Use Tax System (SUTS), which allows for consolidated filing for many jurisdictions.
Home rule cities not administered by the state require separate registration and filing.
Filing frequency in Colorado depends on a business’s tax liability and can be monthly, quarterly or annually. Most businesses file monthly and returns are due by the 20th of the following month.
Tennessee (TN) Sales Tax Guide
Tennessee has a state sales tax rate of 7%, which is among the highest base rates in the country. However, most local jurisdictions add their own taxes, typically ranging from 1.5% to 2.75%, bringing the combined average sales tax rate to around 9.55%.
Most tangible personal property sold in Tennessee is taxable, including clothing, electronics and furniture. Prepared food, software and certain digital goods are also subject to sales tax.
Sales tax exemptions include prescription drugs, some medical devices and most groceries, which are taxed at a reduced rate of 4% at the state level (plus applicable local taxes).
Tennessee also imposes a use tax on taxable goods purchased out-of-state and used in Tennessee when sales tax wasn’t collected at the time of sale. Both individuals and businesses are responsible for remitting this tax if applicable.
Remote sellers must comply with economic nexus rules. If a seller makes more than $100,000 in sales into Tennessee annually, they are required to register and collect Tennessee sales tax, regardless of whether they have a physical location in the state.
Tennessee is a destination-based sourcing state, meaning that sales tax is calculated based on the shipping address of the buyer, not the origin of the sale.
Businesses must file sales tax returns on a monthly, quarterly or annual basis depending on the volume of sales. Most businesses are on a monthly filing schedule and returns are due by the 20th of the following month.
Sales tax returns and payments in Tennessee can be managed through the TNTAP (Tennessee Taxpayer Access Point) system, administered by the Tennessee Department of Revenue.
Compare Sales Tax Rates and Rules in PA, NJ, NY, CO and TN
Sales tax laws can differ significantly depending on where a sale occurs.
Here’s a high-level comparison of the key rates, exemptions and filing requirements for the five states covered in this guide:
State | Base Sales Tax Rate | Key Notes |
6% | Allegheny +1%, Philly +2%; most clothing exempt, economic nexus at $100K sales. | |
6.625% | No local taxes; clothing exempt, SaaS is taxable, economic nexus at $100K or 200 transactions. | |
4% | Local rates up to 4.875%, clothing <$110 exempt, economic nexus at $500K + 100 sales. | |
2.9% | Local rates vary widely, destination-based sourcing, economic nexus at $100K. | |
7% | Local add-ons up to 2.75%, groceries taxed at 4%, economic nexus at $100K sales. |
Why Pipedrive helps manage U.S. sales tax complexity
Selling across state lines? That means juggling different rates, thresholds and tax rules, often with added pressure to stay compliant while closing deals fast. That’s where Pipedrive makes a difference.
With Pipedrive’s custom fields, teams can tag deals or contacts based on state, tax status or economic nexus criteria, helping you filter and prioritize sales with tax considerations in mind.
Need to automate workflows for state-specific follow-ups or renewal reminders? Use Pipedrive’s automation tools to trigger actions based on geography, purchase value or deal stage.
Visual sales pipelines give sales teams a clear view of where deals are across multiple regions. With deal history and activity tracking, you’ll always know what’s been promised, delivered and invoiced, critical for staying audit-ready.
Paired with integrations for accounting tools and tax automation software, Pipedrive helps bridge the gap between sales and finance, giving growing businesses a smarter way to manage compliance as they scale.
FAQ (Frequently asked questions)
What is sales and use tax in the U.S.?
Sales tax is charged on goods and some services at the point of sale. Use tax applies to out-of-state purchases where sales tax wasn’t collected but is still owed by the buyer.
Do I need to collect sales tax in states where I don’t have an office?
Yes, if you meet a state’s economic nexus threshold (based on sales volume or revenue), you may be required to collect and remit tax even without a physical location.
How often do I need to file sales tax returns?
Filing frequency varies by state and business volume, it may be monthly, quarterly or annually. Some states adjust frequency based on how much sales tax your business collects.
What happens if I don’t collect the correct sales tax?
Failure to comply can lead to fines, interest charges or audits. States take noncompliance seriously, so staying current on rules is critical, especially when selling in multiple regions.
Can CRM software help with sales tax compliance?
Yes. A CRM like Pipedrive can track where deals originate, organize contacts by state and integrate with accounting or tax software, helping reduce risk and streamline your workflow.
Final thoughts
Navigating U.S. sales and use tax can feel overwhelming, especially when laws vary so widely across states like Pennsylvania, New Jersey, New York, Colorado and Tennessee. But with the right knowledge and tools, staying compliant doesn’t have to be a burden.
This guide simplifies what you need to know in each state and explains why understanding your tax obligations is key to running a successful, scalable business. Whether you sell products, services or digital goods, having systems in place to manage your compliance is no longer optional and it’s essential.
Try Pipedrive free for 14 days to keep deals moving and simplify your multistate sales operations.
