The answer comes down to two questions: what you sell and where you sell it.

Start with what you sell. Not everything is subject to sales tax. Physical products are almost always taxable. Services vary widely by state. In Tennessee, most services are not taxable, but specific categories like software subscriptions, parking, and amusement activities are. Other states tax services much more broadly. If you’re unsure whether your product or service qualifies, your state’s Department of Revenue website will spell it out.

Then look at where you sell. You only need to collect sales tax in states where you have “nexus,” which is a legal connection to that state. Nexus comes in two forms. Physical nexus means you have a presence there through an office, warehouse, employees, or inventory. Economic nexus means you’ve crossed a sales threshold even without a physical presence. Most states set that threshold at $100,000 in sales or 200 transactions per year, following the 2018 Supreme Court ruling in South Dakota v. Wayfair.

If you only sell locally out of a location in Franklin or the greater Nashville area, your concern is Tennessee sales tax. Register with the Tennessee Department of Revenue, collect the state rate of 7% plus your applicable local rate, and remit it on schedule. If you sell online or ship to customers in other states, you potentially have obligations in every state where you cross their economic threshold.

Each state sets its own rules for what’s taxable, what the thresholds are, and how frequently you file. A handful of states have no sales tax at all (Oregon, Montana, Delaware, New Hampshire, and Alaska at the state level). The rest each have their own rates and requirements. Tracking all of this gets complicated once you’re selling across multiple states.

A few signs you probably need to be collecting: you sell physical products, you’ve been operating for a while without looking into it, you sell online to customers in more than one state, or you recently added a new revenue stream that might be taxable.

If you’re already behind, don’t panic but don’t wait either. States generally prefer voluntary compliance over catching you later. Many offer voluntary disclosure agreements that reduce or eliminate penalties for coming forward on your own.

Working with someone who handles sales tax management can save you from both the confusion of figuring out your obligations and the penalties of getting it wrong. And keeping your books organized with professional bookkeeping services means you always have clear records of where your revenue is coming from and whether you’re approaching thresholds in new states. That visibility matters more than most business owners realize until they’re already behind.