Understanding how sales tax is calculated on your order
How is sales tax calculated on my order?
In most states, sales tax is calculated based on where you take possession of or receive your goods — not where your billing address is located. This is called destination-based sourcing and is how the majority of U.S. states operate.
Exception — Origin-Based States: A handful of states use origin-based sourcing for in-state sales. In these states, when both the store and the delivery address are in the same state, sales tax is calculated based on the store's location, not your delivery address. TaxJar lists the following as origin-based or modified-origin states: Arizona, California (modified origin), Illinois, Mississippi, Missouri, Ohio, Pennsylvania, Tennessee, Texas, Utah, and Virginia.
Important: Tax will only be calculated if the state has been added in the Tax Locations page of your store settings. If you're purchasing in or shipping to a state not configured for tax collection, no tax will be charged.
Why isn't tax based on my billing address?
Your billing address is used for payment processing and fraud prevention only. Sales tax is determined by the location where economic activity occurs — where you physically receive or pick up your items. States collect tax based on where goods are consumed, not where your credit card bill is sent.
Note: In origin-based states, intrastate sales (store and delivery in the same state) are taxed at the seller's location. Your billing address still plays no role in this calculation.
What is Sales Tax Nexus?
Before sales tax is ever calculated, a merchant must have nexus — a legal connection to a state that creates an obligation to collect and remit sales tax there. Nexus is the threshold question that comes before everything else on this page.
Common ways nexus is established:
- Physical nexus — A store location, warehouse, office, or employees in a state
- Economic nexus — Exceeding a state's sales or transaction threshold (commonly $100,000 in sales or 200 transactions in a year) — established in most states following the 2018 South Dakota v. Wayfair Supreme Court ruling
- Affiliate nexus — Business relationships or marketing affiliates operating in a state
If a merchant does not have nexus in a state, they are generally not required to collect sales tax on orders shipping to or picked up in that state — regardless of what is configured in Tax Locations. Conversely, if a merchant does have nexus in a state, they are legally required to collect tax there and should ensure that state is configured.
Important:
The Tax Locations setting in your store reflects the states where you have nexus and are collecting tax. It is your responsibility as a merchant to determine where you have nexus. If you are unsure, consult a tax professional or use a service like TaxJar to analyze your nexus obligations.
Sales Tax by Fulfillment Method
Shipping
Tax is calculated based on your delivery address (where the package is shipped) in destination-based states.
Origin-based state exception: If the store and your delivery address are both in an origin-based state (e.g., Texas, Arizona, Ohio), tax is calculated at the store's location rate instead.
In-Store Pickup
Tax is calculated based on the store location where you pick up your order.
Curbside Pickup
Tax is calculated based on the store location where you pick up your order.
Local Delivery
Tax is calculated based on your delivery address.
DoorDash Delivery
Tax is calculated based on your delivery address.
Marketplace Facilitator Note: In some jurisdictions, DoorDash is classified as a marketplace facilitator and may collect and remit sales tax directly to the tax authority on the merchant's behalf. Whether and to what extent this applies depends on the specific jurisdiction. Merchants should confirm with DoorDash how tax is being handled in their area and configure Tax Locations accordingly.
Uber Eats Delivery
Tax is calculated based on your delivery address.
Marketplace Facilitator Note: In some jurisdictions, Uber Eats is classified as a marketplace facilitator and may collect and remit sales tax directly to the tax authority on the merchant's behalf. Whether and to what extent this applies depends on the specific jurisdiction. Merchants should confirm with Uber Eats how tax is being handled in their area and configure Tax Locations accordingly.
Instacart Delivery
Tax is calculated based on your delivery address.
Marketplace Facilitator Note: In some jurisdictions, Instacart is classified as a marketplace facilitator and may collect and remit sales tax directly to the tax authority on the merchant's behalf. Whether and to what extent this applies depends on the specific jurisdiction. Merchants should confirm with Instacart how tax is being handled in their area and configure Tax Locations accordingly.
Understanding Tax Locations
Sales tax is only charged when your order is delivered to or picked up in a state that has been configured in the store's Tax Locations settings — and only when the merchant has nexus in that state. Here's how it works:
The Two-Step Tax Rule
- Step 1 — Is the state configured? The store checks if the delivery/pickup state is in their Tax Locations (reflecting their nexus).
- Step 2 — What's the exact rate? If YES, tax is calculated using the specific city/county rate of the delivery or pickup address (or the store's address in origin-based states).
✓ Tax IS charged when:
- The merchant has nexus in the delivery/pickup state
- That state is configured in Tax Locations
- It doesn't matter if it's a different city or zip code than the store
✗ Tax is NOT charged when:
- The merchant does not have nexus in the delivery/pickup state
- The delivery or pickup state is not configured in Tax Locations
- Even if the state is nearby or the billing address is in a configured state
- A delivery platform is acting as a marketplace facilitator and collecting tax directly in that jurisdiction (jurisdiction-dependent — confirm with the platform)
Important Examples:
- Same state, different city (destination state): Store in Las Vegas (Nevada) ships to Reno (Nevada) → Tax charged at Reno rate
- Same state, origin-based state: Store in Dallas (Texas) ships to Houston (Texas) → Tax charged at Dallas (store) rate
- Different state, not configured: Store in Nevada ships to California, but California not in Tax Locations → No tax charged
- Billing address doesn't matter: Billing address in Texas, shipping to Nevada (configured) → Nevada tax charged
Example Scenarios
Scenario 1a: Shipping - Tax Charged
- Fulfillment method: Shipping
- Store location: Las Vegas, Nevada (89101)
- Store collects tax in: Nevada (89501)
- Shipping to: Reno, Nevada (89501)
- Billing address: Portland, Oregon
- Tax charged: Reno rate at 89501 (delivery zip is configured)
Scenario 1b: Shipping - No Tax Charged
- Fulfillment method: Shipping
- Store location: Las Vegas, Nevada (89101)
- Store collects tax in: Nevada (89501)
- Shipping to: New York, New York (10001)
- Billing address: Reno, Nevada
- No tax charged (New York not configured in tax locations)
Scenario 2a: In-Store Pickup - Tax Charged
- Fulfillment method: In-Store Pickup
- Store location: Las Vegas, Nevada (89101)
- Store collects tax in: Nevada (89101)
- Your home: Reno, Nevada
- Billing address: Portland, Oregon
- Tax charged: Las Vegas rate at 89101 (store pickup zip is configured)
Scenario 2b: In-Store Pickup - No Tax Charged
- Fulfillment method: In-Store Pickup
- Store location: Los Angeles, California (90001)
- Store collects tax in: Nevada (89101)
- Your home: Los Angeles, California
- Billing address: Nevada
- No tax charged (California not configured in tax locations)
Scenario 3a: Curbside Pickup - Tax Charged
- Fulfillment method: Curbside Pickup
- Store location: Henderson, Nevada (89014)
- Store collects tax in: Nevada (89014)
- Your home: Las Vegas, Nevada
- Billing address: California
- Tax charged: Henderson rate at 89014 (store pickup zip is configured)
Scenario 3b: Curbside Pickup - No Tax Charged
- Fulfillment method: Curbside Pickup
- Store location: Henderson, Nevada (89015)
- Store collects tax in: Nevada (89014)
- Your home: Las Vegas, Nevada
- Billing address: Nevada
- No tax charged (store pickup zip 89015 not configured in tax locations)
Scenario 4a: Local Delivery - Tax Charged
- Fulfillment method: Local Delivery
- Store location: Henderson, Nevada (89014)
- Store collects tax in: Nevada (89101)
- Delivery to: Las Vegas, Nevada (89101)
- Billing address: Arizona
- Tax charged: Las Vegas rate at 89101 (delivery zip is configured)
Scenario 4b: Local Delivery - No Tax Charged
- Fulfillment method: Local Delivery
- Store location: Henderson, Nevada (89014)
- Store collects tax in: Nevada (89101)
- Delivery to: North Las Vegas, Nevada (89030)
- Billing address: Nevada
- No tax charged (delivery zip 89030 not configured in tax locations)
Scenario 5a: DoorDash Delivery - Tax Charged
- Fulfillment method: DoorDash
- Store location: Reno, Nevada (89501)
- Store collects tax in: Nevada (89431)
- Delivery to: Sparks, Nevada (89431)
- Billing address: California
- Tax charged: Sparks rate at 89431 (delivery zip is configured)
Scenario 5b: DoorDash Delivery - No Tax Charged
- Fulfillment method: DoorDash
- Store location: South Lake Tahoe, California (96150)
- Store collects tax in: California (96150)
- Delivery to: Stateline, Nevada (89449)
- Billing address: California
- No tax charged (delivery zip 89449 not configured in tax locations)
Scenario 6a: Uber Eats Delivery - Tax Charged
- Fulfillment method: Uber Eats
- Store location: Las Vegas, Nevada (89101)
- Store collects tax in: Nevada (89102)
- Delivery to: Las Vegas, Nevada (89102)
- Billing address: Texas
- Tax charged: Las Vegas rate at 89102 (delivery zip is configured)
Scenario 6b: Uber Eats Delivery - No Tax Charged
- Fulfillment method: Uber Eats
- Store location: Las Vegas, Nevada (89101)
- Store collects tax in: Nevada (89102)
- Delivery to: North Las Vegas, Nevada (89030)
- Billing address: Nevada
- No tax charged (delivery zip 89030 not configured in tax locations)
Scenario 7a: Instacart Delivery - Tax Charged
- Fulfillment method: Instacart
- Store location: Carson City, Nevada (89701)
- Store collects tax in: Nevada (89701)
- Delivery to: Carson City, Nevada (89701)
- Billing address: Oregon
- Tax charged: Carson City rate at 89701 (delivery zip is configured)
Scenario 7b: Instacart Delivery - No Tax Charged
- Fulfillment method: Instacart
- Store location: Carson City, Nevada (89701)
- Store collects tax in: Nevada (89701)
- Delivery to: Reno, Nevada (89502)
- Billing address: Nevada
- No tax charged (delivery zip 89502 not configured in tax locations)
Key Takeaway
Sales tax depends on three things: whether the merchant has nexus in a state, whether that state is configured in Tax Locations, and whether the state uses destination or origin-based sourcing. Your billing address plays no role in any of these calculations.
Still have questions? Please contact our customer support team for assistance.