- Delaware: Delaware doesn't charge a state sales tax, but it does have a gross seller's tax. This tax is paid by the seller, and it's based on the amount of total sales of goods and services.
- Alaska: Alaska has no state sales tax, but its counties, or boroughs, can charge sales taxes. For example, the Yukon-Koyukuk Census Area charges a 4% sales tax.
- Montana: Montana doesn't have a sales tax, but it enables popular tourist destinations to charge sales taxes at the municipal level.
- New Hampshire: There are no sales taxes anywhere in the state of New Hampshire. The state makes up for its lack of sales tax collection by having the highest property tax rates anywhere in the country.
- Oregon: Oregon also bars the collection of sales taxes at all levels but generates income through a very high personal income tax rate and a higher-than-average property tax rate.
What is nexus?
The use of the word nexus in the context of sales taxes refers to the state that you primarily sell from and your connection to the state. For example, you sell your products from a real space that's located in Illinois. You have a physical connection to the state in the form of an office and a location from where you store and ship your products from.
Prior to 2018, the meaning of the word nexus had a different definition than it does now. A case known as S. Dakota vs. Wayfair made its way to the Supreme Court. The Court ruled that the original definition of nexus for the purposes of sales taxes wasn't in keeping with online sales, and that online retailers were to charge sales taxes according to the buyer's location. Prior to this ruling, sellers weren't required to charge sales tax to out-of-state buyers because they weren't in the same state at the time of the sale.
Now, all states have different definitions of a nexus. You, as a seller, may not be required to collect sales taxes because you don't sell enough to reach a sales threshold set by the state. Other states collect taxes no matter how much or little you sell in that state.
What is value-added tax?
Value-added tax, or VAT, is a tax that's added at each stage of the production of an item. A product becomes worth more at each stage of its transformation. Ingredients and materials are subject to a tax, then as these items are turned from a raw material into a good, more tax is added. Once the good has been completed, packaged, and shipped to market, it's reached its final tax amount. The consumer buys the item with the tax already factored in and pays the face price with no additional taxes charged.
The U.S. is one of the few countries in the world that does not charge VAT. Instead, the decision to charge sales tax is a decision made by each state in the union.