Sales Tax
If you’re an importer or e-commerce seller in the United States, there’s a good chance you’ve asked yourself: What’s the difference between a tariff and sales tax?
On the surface, both are “extra charges” tied to selling goods. But in reality, they apply at different points in the supply chain, are enforced by different authorities, and create different compliance risks.
Mix them up, and you risk underpricing your products, running into serious tax challenges or worse: facing penalties you didn’t see coming.
This guide breaks down tariffs vs. sales tax with real-world U.S. examples, showing you where each applies, how they overlap, and what it means for your business.
A tariff is a tax the U.S. government imposes on goods imported from other countries. The goal is twofold:
Tariffs are collected by U.S. Customs and Border Protection (CBP) the moment goods enter the country.
Tariffs are based on classification, not location. Each product gets an HTS code, which carries a specific duty rate.
Formula: Tariff = Customs Value × Duty Rate
Example:
That tariff is paid upfront to U.S. Customs and Border Protection. Whether you sell the goods later doesn’t change your tariff obligation.
A sales tax is a state-level consumption tax on retail sales of goods and certain services. Unlike tariffs, sales tax doesn’t happen at the border, it’s triggered at the point of sale, when you sell to an end customer.
Sales tax is collected by the seller, added to the invoice, and remitted to state and local tax agencies.
There are two types of nexus:
Formula: Sales Tax = Sale Price × Combined Tax Rate
Example:
Unlike tariffs, sales tax varies by state — and often by county, city, and district. For example:
That means businesses face thousands of different rate combinations nationwide.
Here’s where many importers get tripped up: in many states, tariffs are included in the taxable base for sales tax. That means you may end up collecting sales tax on the tariff itself: a “tax on tax.”
Example:
Instead of collecting $72.50 in sales tax on the $1,000 product, you’re legally required to collect $77.21. That extra $4.71 per transaction may sound small, but across hundreds of orders, it adds up fast.
Imagine you run an online store importing ceramic cookware from Italy:
Now you resell the shipment in New York at a combined state and local sales tax rate of 8.875%:
If you had incorrectly calculated tax only on the $20,000 product value, you would have collected $1,775 instead of $1,847 — a shortfall of $72 on just one shipment. Multiply that across dozens of shipments, and the shortfall becomes both a profit drain and an audit risk.
The key is remembering: tariffs hit you at the border, sales tax hits you at checkout. Both affect your bottom line, but in completely different ways.
Tariffs and sales tax are not interchangeable. One is a federal import duty at the border. The other is a state-level consumption tax at the point of sale. Both matter for your business, but they’re not the same thing.
For U.S. importers, the smartest move is to:
Confusing the two is costly. Getting them right protects profits, prevents penalties, and builds confidence as you scale.
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