# US Sales Tax for Developers (2026-07-21) > The concepts behind every tax calculation: nexus, product taxability, exemptions, sourcing, and marketplace facilitator rules Source: https://docs.trykintsugi.com/docs/2026-07-21/guides/sales-tax-for-developers Building e-commerce platforms, SaaS applications, and marketplaces means working inside one of the most fragmented regulatory systems in software: US sales tax. There is no federal sales tax and no single rulebook. Instead there are 45 states and the District of Columbia that impose one, local jurisdictions in Alaska that impose their own, and more than 11,000 taxing jurisdictions in total, each with its own rates, thresholds, and definitions of what counts as taxable. This guide covers the concepts that decide the number on the invoice. Get these right and the API calls are straightforward. For implementation details, see the Tax Estimate guide and the API Reference. ## The Four-Factor Taxability Framework Sales tax is not a yes or no decision. Every transaction runs the same four checks, in this order, and the first "no" ends it and returns zero tax. 1 Nexus and registration Do you owe anything in this state at all? Tax is only due where an active registration covers the destination. Nexus is the obligation; the registration is the permit that lets you collect against it. See nexus types below. NO → No tax. The estimate comes back with hasActiveRegistration: false and every amount at zero. The estimate reports the registration, not nexus. Nexus lives on nexus determinations as economicNexusMet and physicalNexusMet. Set simulateActiveRegistration to true to price the sale as if you were registered. 2 Product taxability Is this thing taxable here? Driven by the item's product category. Groceries, clothing and SaaS all swing state by state. NO → Exempt product. The line comes back with exempt: true and an exemptReason saying why. Each entry in the line's taxItems reports the outcome of the rule lookup behind that tax. 3 Customer exemption Is this buyer exempt? Resellers, government agencies, nonprofits and educational institutions, backed by a certificate on file. YES → No tax. The line comes back with exempt: true and an exemptReason, and the certificate is what defends it in an audit. When customer.externalId matches a customer Kintsugi already holds, that customer's exemptions and tax registrations are applied automatically. Only an exemption with status ACTIVE is applied. For a one-off that belongs to no customer record, set exempt: true on the line instead. 4 Sourcing Whose rate applies? ## The Four-Factor Taxability Framework Destination states use the buyer's delivery address; a handful of origin states use the seller's location for sales inside their own borders. This decides which jurisdictions appear in taxItems, never whether tax is due. All four pass, so tax is due Each line's taxItems lists the tax applied per jurisdiction, and its taxRate is the combined rate. At checkout Collect the tax Charged to the buyer. The money is not yours to hold. On the filing date Remit and file On the frequency the state assigns: monthly, quarterly or annually. Order matters, and check 2 needs data from you. Each estimate line names either an externalProductId you have already created or a productCategory and productSubcategory pair from the catalog. A pair that does not match the catalog returns 400, and a product that has not been classified yet is priced under the product code UNKNOWN_UNKNOWN. 1. Nexus - The Business Connection Does your business have a connection to this state? Without nexus you have no obligation to collect in that jurisdiction. Nexus comes in two forms: Physical nexus: offices, warehouses, employees, inventory Economic nexus: sales volume or transaction count thresholds Remote employees create physical nexus in the state where they work, even from a home office. So does inventory sitting in a third-party fulfillment center you have never visited. 2. Product Taxability - What's Actually Taxable Is this product or service taxable in this state? Taxability is set by the item's product category, and it varies sharply by state: Physical Goods Almost always taxable: electronics, furniture, general merchandise Often exempt: groceries, prescription drugs, medical devices ## The Four-Factor Taxability Framework State-specific: clothing, which is exempt in Pennsylvania, taxable in California, and exempt below a price cap in New York and Massachusetts Digital Products Taxable: Colorado, Connecticut, Hawaii, Texas, Washington Generally exempt: California, Florida, Nevada Digital goods and software are separate questions in many states, so treat them separately SaaS Taxable: New York, Texas, Pennsylvania, Washington, Massachusetts, Ohio Generally exempt: California, Florida, Virginia Some states tax business use and exempt personal use, or the reverse Services Generally exempt: most states, historically Broadly taxable: Hawaii, New Mexico, South Dakota, West Virginia Selective: repair, installation, and some professional services, state by state Taxability rules change every legislative session, and digital products and services are where they change fastest. Kintsugi maintains the current rules, so classify the product correctly and let the platform resolve the rate. 3. Customer Exemptions - Who Gets Special Treatment Does this buyer qualify for an exemption? Commonly exempt buyers: Businesses purchasing for resale Government agencies Nonprofit organizations Educational institutions Exemptions apply to an estimate in two ways. When customer.externalId matches a customer Kintsugi already holds, that customer's exemptions and tax registrations are applied automatically. For a one-off that belongs to no customer record, set exempt: true on the line. Only an exemption with status ACTIVE is applied by tax calculation. An exemption is only as good as its certificate. Selling tax-free without valid documentation on file leaves you liable for the tax an auditor says you should have collected, plus penalties and interest. 4. Sourcing - Where to Apply the Rate ## The Four-Factor Taxability Framework Which address determines the rate? Destination-based: the buyer's delivery address, which covers nearly every state and every remote sale Origin-based: the seller's location, which a handful of states use for sales inside their own borders Sourcing decides which rate applies. It never decides whether tax is due. See Sourcing Rules below. ## Nexus Types: Physical vs Economic Before 2018, a state could only tax sellers with a physical presence inside it. South Dakota v. Wayfair removed that limit, and every state with a sales tax now also asserts economic nexus. The two are independent, and one is enough. Type A Physical nexus Something of yours is in the state. Any one of these triggers it Offices, stores and warehouses Employees and contractors, including remote staff Inventory storage, including 3PL Trade shows and events Obligation starts Immediately Register before the first taxable sale. There is no grace threshold. Type B Economic nexus You sold enough into the state. Usually either one triggers it Sales volume Commonly $100,000, measured over a rolling year or a calendar year. Transaction count Often 200 sales, though many states have dropped it. Obligation starts On the effective date The state sets it once you cross. Register, then collect from that date. Thresholds, measurement windows and combination rules all vary. New York needs both $500,000 and more than 100 sales; California and Texas look at $500,000 in sales alone. Kintsugi tracks the live values per state, so treat these numbers as shape, not law. Nexus and registration are different things. Nexus is the obligation; a registration is the permit that lets you collect against it. Kintsugi calculates tax where you hold an active registration, and the estimate response reports hasActiveRegistration so you can tell a zero-tax sale from an unregistered one. Set simulateActiveRegistration to true to see what the sale would be taxed at if you were registered. Nexus itself lives on nexus determinations, which report economicNexusMet and physicalNexusMet per jurisdiction. Monitor Sales by State ## Nexus Types: Physical vs Economic Track revenue and transaction counts per state against that state's own threshold, window, and combination rule. Set Up Threshold Alerts Watch for states you are approaching, not just states you have crossed. Registration takes time. Register Before Collecting Collecting sales tax without a permit is unlawful in every state that levies it. The money is not yours to hold. Collect From the Effective Date Start collecting on the date the permit takes effect, which is not always the date you applied or the date it arrived. ## Sourcing Rules: Origin vs Destination You have nexus and a taxable product. One question remains: whose rate applies? Remote sales are always destination-sourced. Origin sourcing is a rule for intrastate sales, where the seller has a location in the same state as the buyer. If you are a remote seller with economic nexus and no presence in the state, use the ship-to address regardless of that state's intrastate rule. Destination-Based Sourcing The rate follows the buyer's delivery address How it works: A Los Angeles merchant charges the San Diego rate on a San Diego delivery Every delivery address is potentially a different rate With more than 11,000 jurisdictions in play, the rate is an address lookup, not a state lookup Kintsugi sources an estimate to the SHIP_TO address when one is supplied, otherwise to BILL_TO. Sending a complete, validated ship-to address is the highest-leverage thing you can do for rate accuracy. Origin-Based Sourcing The rate follows the seller's location, for intrastate sales only States: Arizona, Illinois, Mississippi, Missouri, Ohio, Pennsylvania, Tennessee, Texas, Utah, Virginia. California is a hybrid, below. How it works: An Austin merchant with a Texas location charges the Austin rate to Texas customers Same rate whether the order ships to Dallas, Houston, or rural West Texas Cheaper to compute, and it concentrates local revenue where businesses sit California's Hybrid Sourcing Two sourcing rules on one order State, county, and city taxes: origin-based District taxes: destination-based A single California order can therefore draw on both the seller's and the buyer's address, which is why California is the state most worth testing against real addresses rather than assumptions. ## Marketplace Facilitators Every state with a sales tax now has marketplace facilitator legislation, which moves the duty to collect from the seller to the platform. Whether it applies to you comes down to one question: does the platform take the buyer's money? Platform processes payment Facilitator Amazon, eBay, Etsy, Walmart, TikTok Shop Calculates tax Platform Remits and files Platform You do not register for these sales Send them to Kintsugi anyway, with marketplace: true on the transaction. The tax liability is excluded. Whether their gross sales count toward a state's nexus threshold depends on the state: each nexus period's includeMarketplaceTransactions says. You process payment Storefront Shopify, WooCommerce, your own checkout Calculates tax You Remits and files You Compliance is yours end to end This is the path the four checks describe. Selling on both is the normal case. Marketplace sales being handled by the platform does not exempt you from registering for your direct sales, and it does not undo physical nexus you already have in that state. Segregating facilitated from direct sales in your own reporting is what keeps the two straight at filing time. ## Collection Timeline Sales tax obligations follow a sequence, and every step in it is a date your system should know. Home State Registration Register before your first sale. Most states require a permit regardless of volume once you are operating there. Physical Nexus Registration Register before your first taxable sale into a state where you have presence. Physical nexus carries no grace threshold. Economic Nexus Monitoring Track sales by state and register once you cross. The deadline runs from the crossing date and varies by state, so record the date you crossed, not just the fact that you did. Begin Collection Collect from the effective date of your permit, and apply the rate for the buyer's address on every order from that point. File Returns File and remit on the frequency the state assigns, whether monthly, quarterly, or annually. File even for periods with no sales: most states require a zero return, and missing one draws a penalty on nothing. ## System Architecture Requirements A compliant system needs all of the following. Kintsugi maintains this logic for you: Nexus Tracking Engine Continuously monitor sales across all states, compare them to current thresholds, and flag registration before the deadline rather than after. Key features: Real-time sales aggregation by state Threshold monitoring and alerts Registration deadline tracking Historical data analysis Product Taxability Matrix Map SKUs to state-specific tax rules, including exemptions, reduced rates, and price caps. Key features: SKU-to-taxability mapping State-specific product rules Exemption handling Regular rule updates Rate Calculation Engine Resolve rates from precise geocoding of delivery addresses, applying origin and destination logic per state. Key features: Accurate address geocoding Origin vs destination logic 11,000+ jurisdiction support Real-time rate updates Exemption Certificate Management Collect, validate, and store documentation for exempt sales, with workflows for renewal and expiration. Key features: Certificate collection and storage Validation and verification Renewal tracking Audit trail maintenance Marketplace Sales Segregation Separate facilitated from direct sales in reporting, since the two are filed differently and count differently. Key features: Sales channel identification Separate reporting streams Compliance tracking Audit trail maintenance Comprehensive Audit Trails Keep a record of every calculation, including the nexus determination, the taxability decision, the sourcing rule, and any exemption applied. Key features: Complete calculation history Decision point logging Data integrity checks Compliance reporting ## System Architecture Requirements Sales tax obligations move as your business grows, as states change their laws, and as you add sales channels. The five concepts on this page (the four checks, nexus types, sourcing, marketplace facilitator rules, and collection timing) are what let you build systems that scale with the business instead of being rewritten by the next threshold you cross. ## Next Steps Get Started Ready to implement? Start with the Getting Started Guide and the API Reference. Need Help? Questions about your specific use case? Check our Support Center or contact our team. --- Index of every page: https://docs.trykintsugi.com/llms.txt