What is Sales Tax?

A sales tax is a tax imposed on retail goods and services at the point of sale. The tax is collected by the entity selling the product or service to a third party, and is remitted to the applicable government entity at regular intervals. A business is required to collect sales tax when it has nexus within the taxing region. This has historically meant that the firm has a physical presence in the region, perhaps because of a facility, or because an employee lives there. The nexus concept has recently been expanded by a Supreme Court ruling to also include any region into which a business sells goods or services, such as through a website store.

Sales taxes are a key form of revenue for state, county, and local governments.