Can I invoice clients without charging sales tax in the US?

Understanding the Question: “Can I Invoice Clients Without Charging Sales Tax in the US?”

If you run a small business, freelance, or sell products and services in the United States, you’ve probably faced this moment: you’re ready to send an invoice, you want to get paid quickly, and you’re not sure whether you should add sales tax. The short truth is that sometimes you can invoice without charging sales tax, and sometimes you absolutely cannot. The “right” answer depends on what you sell, where you and your customer are located, where you have sales tax obligations, and whether any exemptions apply.

This article walks through the practical rules and common scenarios that determine whether you can legally invoice clients without charging sales tax in the US. It’s written for real-world business owners who want to invoice correctly, avoid penalties, and keep things simple for their customers. Throughout, we’ll also cover how to keep your invoicing organized so you can prove why tax was or wasn’t charged if you’re ever questioned by a customer, accountant, or state agency.

Sales Tax Basics: What Sales Tax Is (and What It Isn’t)

Sales tax in the US is generally a state-level tax on certain transactions. Unlike some countries that have a national value-added tax, the US sales tax system is decentralized. Most states have their own rules, tax rates, definitions of taxable goods and services, and filing requirements. Many local jurisdictions (cities, counties, special districts) add their own sales tax as well.

It’s important to understand what sales tax is not. Sales tax is not income tax. It is not “extra profit.” In many cases, you collect it from your customer and then remit it to the state (and sometimes local jurisdictions). You’re essentially acting as a tax collector. If you charge sales tax when required but don’t remit it, you can face serious penalties. If you fail to charge sales tax when required, you may still owe the tax out of your own pocket.

When You Can Usually Invoice Without Charging Sales Tax

There are several common situations where it may be perfectly normal to invoice without sales tax. But “usually” is the key word—because the US system is full of exceptions and state-specific rules.

1) Your State Doesn’t Have Sales Tax

A small number of states do not have a statewide sales tax. If your business has obligations only in a no-sales-tax state, you may not need to charge sales tax on invoices. However, you still have to consider whether you have obligations in other states where you do business. The absence of sales tax in your home state doesn’t automatically mean you never need to collect it.

2) You’re Selling Something That Isn’t Taxable in That State

Not everything is subject to sales tax everywhere. Many states tax tangible personal property (physical goods), but services are treated differently depending on the state. Some states tax only a narrow set of services; others tax many services, including digital services or SaaS subscriptions. Some states tax digital goods (like downloadable files) while others don’t. Some states tax shipping or delivery charges; some don’t.

So, if you’re invoicing for a service that your customer’s state does not tax, you may be able to invoice without charging sales tax—assuming you otherwise have a sales tax obligation there.

3) You Don’t Have a Sales Tax Collection Obligation (Nexus) in the Customer’s State

One of the most important concepts in US sales tax is “nexus,” which is a connection between your business and a state that creates a legal obligation to collect and remit sales tax. If you don’t have nexus in a state, you often do not have to collect that state’s sales tax (although your customer may owe “use tax” on their end).

Nexus can be created in multiple ways, including physical presence and economic activity. The definition and thresholds vary by state, but it generally comes down to whether your business is sufficiently involved with the state to be required to collect tax.

4) Your Customer Is Exempt and Gives You Valid Documentation

Some customers do not pay sales tax on certain purchases. For example, many states exempt sales to resellers (who will resell the item and collect sales tax when they sell it) and to certain nonprofit organizations, governments, or other exempt entities. In those cases, you can often invoice without charging sales tax—but only if you obtain and keep the appropriate exemption documentation, typically a resale certificate or exemption certificate.

The key point is documentation. If an exemption applies but you don’t have proof, the state may treat it as a taxable sale and require you to pay the tax anyway.

5) The Sale Is a “Sale for Resale” (Wholesale Transactions)

If you sell products to a buyer who is purchasing for resale, you may not charge sales tax if the buyer provides a resale certificate and you follow the rules in that state. This is common in wholesale. Your invoice might show the line items and clearly indicate “Sales tax not charged—resale certificate on file” or similar language, depending on your preferences and compliance style.

When You Must Charge Sales Tax on an Invoice

Now for the other side. There are also many situations where you are required to charge sales tax. If you fall into these categories and skip sales tax, you may face penalties, interest, and back taxes.

1) You Have Nexus in the State Where the Tax Applies

If you have nexus in a state and the product or service is taxable there, you generally must collect and remit sales tax. Nexus can happen in surprisingly easy ways, such as maintaining an office, having employees, storing inventory, using a warehouse or fulfillment center, attending trade shows (in some states), or sending technicians or installers into a state.

Economic nexus is also important. Many states impose sales tax obligations based on sales volume or number of transactions into the state, even if you have no physical presence there. Once you cross that state’s threshold, you may need to register and start collecting.

2) You’re Selling Taxable Goods or Taxable Services

Physical goods are often taxable, but the details can still be tricky. Food, clothing, and medicine are sometimes taxed differently or exempt, depending on the state. Services vary widely. Some states tax repair services, landscaping, cleaning, or installation. Others tax digital products, streaming, downloads, or SaaS. Professional services like consulting may be non-taxable in many states, but not always.

If you sell a mix of goods and services, you also need to consider “bundled transactions.” Some states treat a combined package as fully taxable if the taxable portion is not separately stated, or if the service is considered part of the sale of goods. Clear line items on invoices matter a lot here.

3) You’re Registered (or Required to Be Registered) in That State

If you have already registered for a sales tax permit in a state, you generally must charge sales tax on taxable transactions in that state. Being registered often comes with a legal duty to collect. Even if you later determine that a particular sale is exempt, you should document the exemption properly.

How Sales Tax Is Determined: Origin-Based vs Destination-Based Rules

Many businesses assume sales tax is simply based on where their business is located. That’s not always true. In many states, sales tax is destination-based, meaning it’s based on the customer’s location (where the product is shipped or where the service is delivered). In other states, it can be origin-based, destination-based, or a mix depending on the type of transaction.

For invoicing, this matters because it affects which tax rate applies. The correct rate might depend on the customer’s address, not your business address. Getting this wrong can lead to under-collection (you owe the difference) or over-collection (you may need to refund the customer).

What Counts as “Selling” in a State?

Sales tax obligations aren’t limited to brick-and-mortar stores. Many businesses invoice clients across state lines. A “sale” can include:

• Shipping physical products to a customer in another state

• Delivering digital products to customers in another state

• Providing services to customers in another state (depending on how the state sources services)

• Licensing software or providing subscriptions to customers in another state

• Installing, repairing, or performing work at a customer’s location in another state

Because each state can define taxable transactions differently, it’s not enough to know you’re “just sending an invoice.” You need to understand what the invoice represents.

Common Business Types and How Sales Tax Often Applies

Let’s break down several common invoice scenarios. These examples are general and meant to help you think through the decision. Exact rules can vary by state and by the details of the transaction.

Freelancers and Consultants

Many consulting services are not subject to sales tax in many states. That leads many freelancers to invoice with no sales tax. However, some states tax certain types of services, and some consulting engagements include taxable deliverables. For example, if you provide a consulting service but also deliver a taxable product (like a printed manual or certain digital goods), or you bundle implementation services with software access, taxability can change.

If you are a consultant who travels to clients, be careful. In some cases, physically working in a state can create nexus or change how the service is sourced for tax purposes.

Web Designers, Developers, and Creative Services

Creative services can be tricky. Some states treat digital deliverables differently from services. If you’re creating a custom website and transferring certain assets, one state may treat it as a service, another as a taxable digital product, and another might treat it as a non-taxable custom product. If you host the website or provide maintenance subscriptions, that can be treated as a taxable service in some places.

Clear invoice line items help. Separating design services, development services, hosting, maintenance, and any digital products can reduce confusion and may affect taxability.

Ecommerce Sellers of Physical Products

If you sell physical products and ship across states, sales tax becomes a central operational issue. You may need to collect tax in states where you have nexus. If you use marketplaces, some states require the marketplace to collect sales tax on your behalf, but that doesn’t always cover every channel you sell through. Invoicing business customers may involve resale certificates.

If you sell B2B, you might be tempted to skip sales tax assuming “business clients don’t pay sales tax.” That’s not true. Business customers pay sales tax unless they are exempt, such as purchasing for resale or under a specific exemption category.

Contractors, Installers, and Field Services

Businesses that install, repair, or perform services in the field often face complex rules. States may tax labor differently depending on whether it’s repair labor, installation labor, or construction labor. Some states treat contractors as end consumers of materials (meaning the contractor pays sales tax when buying materials, rather than charging it to the client). Other states require contractors to charge tax in certain situations.

Because the rules can vary dramatically, invoicing without sales tax in this category should be done carefully and with a clear understanding of state-specific contractor tax rules.

Software, SaaS, and Digital Products

Digital taxability has expanded over time, and states treat software very differently. Some states tax prewritten software, some tax SaaS, some tax digital downloads, and some tax only if the customer receives tangible media. Invoicing for software access without understanding the customer’s state rules can lead to compliance issues.

If you sell subscriptions, renewal invoices often need the same tax treatment as the original sale. If you provide a mix of taxable and non-taxable features, bundling can become an issue unless your invoice separates the components.

Do You Need a Sales Tax Permit Before Charging Sales Tax?

In most states, you should register for a sales tax permit before collecting sales tax. Collecting sales tax without being registered can create legal and operational problems. It’s generally not enough to simply add a “tax” line to your invoice. States want you registered, reporting on schedule, and remitting properly.

That means the decision “Should I charge sales tax?” is often paired with “Do I need to register?” If you have nexus and taxable sales, registration is usually required.

What If You Don’t Charge Sales Tax but You Should Have?

If you fail to charge sales tax when required, the state may still treat you as responsible for the tax. This is a painful situation because you may not be able to go back to the customer later (or it may harm your relationship). The result is that the tax comes out of your revenue. On top of that, there can be penalties and interest.

If you discover this issue, many businesses choose to correct their process going forward, consult a tax professional about past liability, and avoid making the mistake again. Invoicing accurately from the start is almost always cheaper than cleaning up later.

What If You Charge Sales Tax When You Shouldn’t Have?

Overcharging sales tax can also cause problems. Customers may demand refunds. Some states have rules requiring you to refund tax to customers if it was collected in error, or they may require that any collected tax be remitted even if it wasn’t legally due. Either way, charging tax incorrectly can be messy.

It’s better to determine taxability and nexus upfront and invoice correctly. Good invoicing records can also help you resolve disputes quickly.

Exemptions: How to Invoice Without Sales Tax the Right Way

If you’re not charging sales tax because the sale is exempt, treat it as a compliance workflow, not a casual decision. Here’s how to do it responsibly:

Step 1: Confirm the Exemption Category

Common exemptions include resale, nonprofit exemptions, government exemptions, manufacturing exemptions, and industry-specific exemptions. The exemption category must match the reason the customer is not paying tax.

Step 2: Collect the Right Certificate

Most exemptions require a certificate. For resale, that’s typically a resale certificate. For nonprofits, it may be a state-issued exemption certificate or other documentation. Requirements vary by state, and some states require specific forms.

Step 3: Keep Certificates Organized and Accessible

States can audit multiple years back. You need to keep exemption certificates organized and tied to the customer and transactions. A good invoicing workflow includes attaching or linking exemption documentation in your records so you can prove why sales tax wasn’t charged.

Step 4: Show Clear Notes on the Invoice

While not always required, it can be helpful to include a short note such as “Tax exempt purchase” or “Resale certificate on file” to reduce customer confusion and to support your records. Keep it professional and consistent.

Crossing State Lines: Invoicing Out-of-State Clients

A very common misconception is: “If my client is out of state, I don’t charge sales tax.” Sometimes that’s true, but often it’s not. The right rule is: you charge sales tax if you have nexus in the customer’s state and the transaction is taxable there, and you may not charge if you lack nexus or if the sale is exempt or non-taxable.

For physical products shipped to customers, destination-based rules are common, which means the customer’s location is central to tax calculation. For services and digital goods, states can use different sourcing methods. If you invoice clients nationwide, it’s especially important to monitor where your sales are growing so you can identify when you might cross an economic nexus threshold.

Economic Nexus: The Threshold You Might Not Notice Until It’s Too Late

Economic nexus refers to sales tax obligations triggered by reaching a certain level of sales or number of transactions into a state. The exact thresholds vary by state. Some states use a revenue threshold, some use transaction counts, and some have changed their rules over time.

This is why fast-growing businesses often get surprised. You can start the year with no obligation in a state, then your sales increase, and suddenly you cross the threshold. From that point, you may need to register and start collecting sales tax, sometimes quickly. Keeping an eye on sales by state is a smart habit.

How to Structure Your Invoice to Handle Sales Tax Clearly

Even when you can invoice without sales tax, your invoice should still be clear and professional. When sales tax applies, it should be transparent. Here are best practices that help in both situations:

Use Separate Line Items for Products and Services

If your invoice includes multiple categories, separate them. This makes it easier to determine taxability and defend your calculation. It also reduces customer questions and helps you remain consistent across invoices.

Show Sales Tax as Its Own Line

When you charge sales tax, list it as a separate line rather than bundling it into a product price. Many customers expect to see a subtotal, tax, and total. This also makes accounting easier.

Include Your Business Address and the Customer’s Address

Address details can matter for tax rate determination, especially for destination-based jurisdictions. A complete invoice also looks more credible and helps with collections.

Add an Invoice Number and Issue Date

These basics are essential for bookkeeping, tracking payments, and resolving disputes. They also matter if you ever need to correct or credit an invoice.

Document Why Tax Is Not Charged (When Relevant)

If tax isn’t charged because the sale is exempt or non-taxable, a short note can help. If tax isn’t charged because you don’t have nexus in that state, you might not need to mention it, but your internal records should reflect your reasoning.

What About Use Tax? (Why Customers Might Still Owe Tax)

Even if you don’t charge sales tax, that doesn’t always mean the transaction is “tax-free.” Many states have a use tax, which is essentially the counterpart to sales tax. If the seller doesn’t collect sales tax, the buyer may be required to pay use tax directly to their state. In practice, many consumers and even some businesses overlook use tax, but the obligation can still exist.

As the seller, you generally focus on whether you are required to collect sales tax. Still, understanding use tax helps explain why a customer might ask, “Why didn’t you charge tax?” or “Do I need to pay tax?”

Special Cases That Commonly Cause Confusion

Shipping and Handling

Shipping taxability varies by state. Some states tax shipping if it’s part of the sale of taxable goods. Others exempt shipping if it’s separately stated. The way you show shipping on the invoice can matter. If you ship products, treat shipping as a line item and be consistent.

Discounts, Coupons, and Promotions

Some states calculate sales tax on the price after discounts; others treat certain discounts differently depending on who funds the discount. If you run promotions, make sure your invoices show discounts clearly so the taxable base is accurate.

Deposits and Progress Invoices

In project-based work, you might invoice a deposit upfront and then invoice progress payments. Tax timing can depend on the state and the nature of the sale. If you invoice for taxable goods in advance, you may need to collect tax with those invoices rather than waiting until final delivery.

Refunds, Credits, and Cancellations

If you refund a taxable sale, you generally need to refund the tax as well, and handle it properly in your sales tax reporting. Credit notes or credit memos should be tracked carefully so your reported taxable sales match reality.

How to Decide: A Practical Checklist

If you’re trying to decide whether you can invoice without sales tax, use this checklist as a starting point:

1) What am I selling (physical goods, digital goods, SaaS, services, mixed)?

2) Where is my customer located (state and local jurisdiction)?

3) Where is the product delivered or service performed?

4) Do I have nexus in that customer’s state (physical or economic)?

5) Is the item taxable in that state?

6) Is the customer exempt, and do I have valid documentation?

7) Am I registered for sales tax there, or do I need to be?

Answering these questions can clarify whether you can invoice without sales tax or whether you need to calculate and add it.

Keeping It Simple While Staying Compliant

Sales tax compliance can feel overwhelming, especially if you invoice clients in multiple states or sell a combination of products and services. The goal isn’t to memorize every rule in every state. The goal is to build a repeatable process that helps you make consistent, defensible decisions.

That process typically includes: tracking where your customers are, understanding what you sell and how states classify it, monitoring whether you’re approaching nexus thresholds, and collecting exemption certificates when needed. When your business expands, you can adjust your process and register in new states as required.

How Invoice24 Can Help You Invoice Professionally (With or Without Sales Tax)

Regardless of whether you charge sales tax, your invoices should be clear, consistent, and easy for customers to pay. A reliable invoicing workflow saves you time, reduces back-and-forth, and improves cash flow.

With invoice24, you can create professional invoices that include all the essentials: customer details, your business details, itemized line items, discounts, shipping, notes, and clear totals. When sales tax applies, you can add tax as its own line so customers immediately understand what they’re paying. When sales tax doesn’t apply, you can keep invoices clean and still include helpful notes where appropriate.

Because invoicing and compliance go hand in hand, staying organized matters. Keeping consistent invoice numbers, accurate dates, and clear descriptions can make a big difference if you ever need to reconcile accounts, respond to customer questions, or work with an accountant. invoice24 supports the kind of tidy recordkeeping that makes business easier.

Final Thoughts: Yes, Sometimes You Can—But Make Sure It’s for the Right Reason

So, can you invoice clients without charging sales tax in the US? Yes, in many situations you can—such as when what you sell isn’t taxable in that state, when the customer is exempt and you have documentation, when you’re operating in a no-sales-tax state, or when you don’t have nexus in the customer’s state. But there are also many situations where you must charge sales tax, especially if you have nexus and sell taxable goods or services.

The safest approach is to treat sales tax as a decision you make intentionally, not a default you assume. If you’re uncertain, it’s wise to review your sales by state, understand the taxability of what you sell, and build a routine around exemption certificates and clear invoicing. With a solid process and professional invoices, you can bill clients confidently—whether sales tax is included or not.