Do I Charge Sales Tax on Out-of-State Sales If I Have Nexus Only in PA?

Someone on Reddit has an online business with nexus in Pennsylvania. They asked: when shipping to states outside PA, do they need to charge sales tax? It "seems wrong" but that's what they've been finding. They also asked: Is it only when passing the nexus threshold that I need to establish nexus in other states? and Do I add some sort of flat rate or is there simply no tax on out-of-state sales? Your understanding is correct. For shipments to states outside Pennsylvania, you do not have to charge sales tax in those states unless you have nexus there. If you have nexus only in Pennsylvania, you collect Pennsylvania sales tax on Pennsylvania sales and do not charge sales tax on out-of-state sales until you establish nexus in another state (e.g., by crossing that state's economic nexus threshold). There is no single flat rate for all out-of-state sales: either you have no nexus (no tax) or you do (you collect that state's rate).

Bottom line: For shipments to states outside Pennsylvania, you do not have to charge sales tax in those states unless you have nexus there. If you have nexus only in Pennsylvania, you collect PA sales tax on PA sales and do not charge sales tax on out-of-state sales until you establish nexus in another state (e.g., by passing that state's economic nexus threshold). There is no flat rate for "all out-of-state" sales: in states where you have no nexus you add no tax; in states where you do have nexus you must charge that state's (and often local) sales tax, usually destination-based. Track sales by state and register and collect once you exceed a state's threshold.

Question from Reddit

Small Business Tax/Nexus Question

Unsolved

I have an online business with nexus in Pennsylvania, when shipping to states outside of PA i do not need to charge tax? This seems wrong somehow but it is what I have been finding. Is it only when passing the nexus threshold that I need to establish nexus in other states? I am new to small business tax stuff so any help is helpful! Do I add some sort of flat rate or is there simply no tax added with out of state sales?

Source: Reddit

Analysis

The user has an online business with nexus in Pennsylvania and wants to know: (1) Whether they must charge sales tax on shipments to states outside PA; (2) Whether nexus in other states only arises when they pass a nexus threshold in those states; and (3) Whether they add a flat rate or no tax on out-of-state sales. Sales tax is state (and sometimes local); you generally only have to collect and remit in states where you have nexus (physical presence or economic nexus). Many states use economic nexus (e.g., over $100,000 in sales or 200 transactions in the state per year), so once you cross that threshold in a state, you must collect that state's sales tax on sales into that state. There is no single "flat rate" for all out-of-state sales; either you don't have nexus (no tax) or you do (you collect that state's rate, often destination-based).

Answer

Your understanding is correct. For shipments to states outside Pennsylvania, you do not have to charge sales tax in those states unless you have nexus there. So if you have nexus only in Pennsylvania, you collect Pennsylvania sales tax on Pennsylvania sales and do not charge sales tax on out-of-state sales until you establish nexus in another state (e.g., by crossing that state's economic nexus threshold).

Why it feels "wrong"

It can feel "wrong" because the customer in another state may still owe tax on the purchase, usually use tax in their home state (many states require consumers to self-report and pay use tax on out-of-state purchases). So tax may still be owed; you're just not the one collecting it until you have nexus in that state. Once you have nexus in a state, you're generally required to collect that state's sales (or use) tax on sales into that state.

When do you have nexus in another state?

Physical presence: If you have physical presence in a state (e.g., office, warehouse, employee, inventory in a fulfillment center), you typically have nexus there and must collect that state's sales tax on sales into that state.
Economic nexus: After South Dakota v. Wayfair (2018), most states have economic nexus rules. If your sales into a state (or number of transactions) exceed that state's threshold in a calendar or prior year, you have nexus in that state and must register, collect, and remit that state's sales tax. Thresholds vary by state; common ones are $100,000 in sales into the state or 200 transactions in the state per year (or both). So yes: it's when you pass the nexus threshold in a state that you establish nexus there and must start charging that state's tax on sales into that state.

Do I add a flat rate or no tax on out-of-state sales?

No flat rate applies to "all out-of-state" sales. It's state-by-state:
- States where you have no nexus: You do not charge sales tax on those sales. So for most out-of-state sales (until you hit thresholds), you add no tax.
- States where you do have nexus: You must charge that state's (and often local) sales tax on sales into that state. The rate is usually destination-based (customer's location), not a single "flat rate." So you'd use that state's rate (and any local rates) for each sale, often with sales tax software (e.g., Avalara, TaxJar) that calculates by address.
So: Out-of-state sales where you have no nexus = no tax added. Out-of-state sales where you do have nexus = that state's (and local) rate, not a generic flat rate.

What you should do

Pennsylvania: Collect and remit PA sales tax on Pennsylvania sales (you already have nexus there).
Other states: Track your sales by state (and, if applicable, transaction count). When you exceed a state's economic nexus threshold, register in that state and start collecting and remitting that state's sales tax on sales into that state.
Rates: Use destination-based rates (customer's state/locality) when required; sales tax software can automate this.
Margen can help you model business income and tax; for sales tax by state, use nexus and sales tax tools or a tax professional who does e-commerce and state tax.
Consult a tax professional (or sales tax specialist) who understands e-commerce and state nexus so you stay compliant as you grow.

Applicable Sections

State Tax / Nexus

Physical presence: Traditional basis for sales tax nexus; office, warehouse, employees, etc. in a state can create nexus.
Economic nexus: After South Dakota v. Wayfair, 576 U.S. 977 (2018), states may require remote sellers to collect sales tax when sales or transactions into the state exceed a threshold (e.g., $100,000 in sales or 200 transactions per year). Thresholds vary by state; check each state's Department of Revenue or tax authority.
Pennsylvania: PA Department of Revenue for PA sales tax and nexus rules. Other states have their own economic nexus rules and thresholds.

Practical Notes

PA nexus = collect PA sales tax on PA sales.
Out-of-state = no sales tax until you have nexus in that state (physical or economic).
Economic nexus = state-by-state thresholds (e.g., $100k or 200 transactions); monitor sales by state.
No single "flat rate" for out-of-state; either no tax (no nexus) or that state's rate (nexus).
Sales tax software and a tax pro (e-commerce/state tax) can help with registration, rates, and filing.

Limitations

This answer does not cover local rates, product exemptions, or every state's threshold. State rules change. For your business and each state you sell into, consult a tax professional or sales tax specialist. You can use Margen for income tax modeling; for sales tax compliance, use nexus and sales tax tools or a specialist.

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Online Business with PA Nexus: Do I Charge Tax on Out-of-State Sales? (Reddit Q&A)