Who taxes what you spend?
Part 3 of an October series on who gets to tax you. Part 2 was Who taxes what you own?
Mostly the state and city where you take delivery, through sales tax. Then excise taxes on particular products. And at the border, tariffs, which are federal and paid by whoever imports the goods.
Sales tax: charged by the seller, owed by the buyer
Forty-five states and D.C. have a general sales tax, and local jurisdictions add their own rates on top. The tax falls on the buyer, but the seller collects it and sends it in.
When a seller has to collect in a state is the whole subject of do you owe sales tax in states you've never been to? For goods shipped across state lines, the rate that applies is almost always the one at the buyer's delivery address, not the seller's location.
Use tax: the part people skip
When a seller doesn't charge sales tax, say an out-of-state vendor or an online purchase, the buyer owes use tax at the same rate instead. Most individuals never pay it. Businesses get audited on it, especially for equipment, software, and supplies bought without tax on the invoice.
Is what you sell taxable at all?
Goods generally are, with exemptions that vary by state: groceries in many states, prescriptions, materials that go into something being manufactured. Services are far less consistent. Most states tax only the services their law specifically lists, so the same consulting work can be untaxed in one state and taxable in the next. Digital products and software subscriptions are the least consistent of all.
If you buy inventory to resell, a resale certificate lets you buy it without paying tax, because the tax gets collected when you sell to the end customer. If you pull an item out of inventory and use it yourself, you owe use tax on it.
Excise taxes
Excise taxes fall on specific products or activities: fuel, alcohol, tobacco, firearms and ammunition, airline tickets. Both the federal government and the states levy them, and they're usually built into the price, so most people pay them without ever seeing a line item. If your business makes, imports, or sells those products, the excise return is often yours to file, not your customer's.
Tariffs
Tariffs are federal. States have no part in them. They're owed by the importer of record, whoever brings the goods through customs, and collected by U.S. Customs and Border Protection at entry. The foreign seller doesn't pay them. You do, if you're the importer, and the cost usually lands in the price your customer pays.
The change that hit small businesses hardest: shipments valued at $800 or less used to come in duty-free. That exemption was suspended for every country as of August 29, 2025, and a 2025 statute repeals it permanently as of July 1, 2027. A federal trade court upheld the suspension in August 2026, so it stays off until the permanent repeal takes effect. Small parcels now need a customs entry and pay full duty.
The rates themselves have changed repeatedly, and some have been struck down in court. Check the current rate for your product and its country of origin before you set a price, not after. And read your terms of sale with overseas suppliers. They decide who the importer of record is, and whoever that is owns the duty, the customs entry, and the paperwork.
Why spending taxes land on businesses
A consumer pays these taxes. A business collects them, sends them in, and owns the mistakes. Sales tax you should have collected and didn't comes out of your pocket, not your customer's.
What to do
Know where your customers are, and whether what you sell is taxable in each of those states.
Track use tax on anything your business buys without sales tax.
If you import, know who the importer of record is, and budget duty on every shipment, no matter how small.
Keep reading: Resale certificates: buying inventory without paying sales tax and Do you owe sales tax in states you've never been to?
Next in the series, Tuesday, October 27: Who taxes what you transfer?
This is general information, not legal advice for your situation. If you want an answer for your business, book a consultation.
