Common Sales Tax Terms Every Business Owner Should Know

Lisa Jones
Jun 2
3 min read

Updated: Jun 28

Navigating the world of sales tax can be overwhelming for many business owners, especially those new to selling taxable goods or services. Understanding key sales tax terminology is essential for compliance, accurate reporting, and avoiding costly mistakes.

In this article, we’ll cover some of the most important common sales tax terms every business owner should know — empowering you to manage your sales tax obligations confidently.

Essential Sales Tax Terms Explained

1. Sales Tax

A tax imposed by state or local governments on the sale of tangible personal property and certain services. Businesses collect this tax from customers at the point of sale and remit it to the tax authority.

2. Use Tax

A tax on the use, storage, or consumption of goods purchased out-of-state or without sales tax. Use tax ensures taxes are paid on taxable goods even if sales tax wasn’t collected at purchase.

3. Nexus

The connection or presence a business has in a state that creates a tax obligation. Nexus can be physical (office, warehouse) or economic (sales thresholds). Having nexus means your business must collect and remit sales tax in that state.

4. Exemption Certificate

A document provided by a customer to a seller that certifies the purchase is exempt from sales tax (e.g., for resale or nonprofit organizations).

5. Taxable and Non-Taxable Sales

Taxable sales are goods or services subject to sales tax. Non-taxable sales include items exempted by law (such as groceries or medical supplies in some states).

6. Resale Certificate

A certificate that allows a business to purchase goods tax-free if those goods are intended for resale to customers.

7. Sales Tax Permit (License)

An official authorization issued by a state allowing a business to collect sales tax from customers.

8. Filing Frequency

The schedule on which a business must report and remit collected sales tax—monthly, quarterly, or annually—based on sales volume or state requirements.

Why Understanding These Terms Matters

Being familiar with these terms helps you:

Avoid costly compliance mistakes
Understand your sales tax collection and remittance responsibilities
Recognize when you need to register for permits or collect exemption certificates
Manage audits and reporting more effectively

Sales tax compliance is complex but critical for your business’s financial health and legal standing.

How Manage My Sales Tax Can Help You Master Sales Tax

At Manage My Sales Tax, we understand that mastering sales tax terms and obligations can be challenging for any business. That’s why we offer comprehensive services tailored to your needs:

Clear Guidance:
We break down complex tax jargon into easy-to-understand advice.
Compliance Support:
From registering your sales tax permits to collecting exemption certificates, we handle it all.
Audit Preparation:
We help you prepare for and manage state audits confidently.
Ongoing Updates:
Sales tax laws change frequently; we keep your business informed and compliant.

With over 20 years of experience, our team simplifies your sales tax processes so you can focus on growing your business without worry.