No federal VAT: sales tax instead
The United States has no federal VAT or national sales tax. State and local governments set sales and use tax rules, so there is no nationwide rate, threshold or definition of a taxable sale.
Sales tax often applies to retail sales of tangible personal property, but treatment of services, software and digital products varies. Alaska, Delaware, Montana, New Hampshire and Oregon have no statewide general sales tax, although Alaska localities can levy sales tax and other state taxes can still apply. The tax result can depend on registration, sourcing, marketplace-facilitator rules, product classification and exemption documentation, not just the delivery address.
What should a US invoice contain?
Because there is no federal mandate dictating an invoice format, US businesses have flexibility, but a clear, professional invoice should still carry a consistent set of fields. These make the invoice easy to pay, easy to reconcile, and defensible if a customer or a tax authority ever questions it. You can assemble all of them by hand or use a free invoice generator that lays out the fields and totals for you:
- Seller details
- Your business name, address and contact information, plus a licence or sales-tax registration number when a rule requires it. Do not publish a TIN merely as a generic invoice field.
- Buyer details
- The customer’s name, billing address, and the shipping or service address, which can determine the correct sales tax rate.
- Invoice number
- A unique, sequential identifier so both parties can reference and track the document.
- Invoice date and due date
- The issue date and the payment terms (for example, Net 30), which set when payment is expected.
- Line items
- A clear description of each product or service, the quantity, the unit price, and the line total.
- Subtotal
- The total of all line items before any tax is applied.
- Sales tax
- The applicable state and local sales tax shown as a separate line, charged only where you have nexus and the sale is taxable.
- Total amount due
- The final amount the customer owes, including any taxes and minus any discounts or deposits.
- Payment instructions
- How to pay: accepted methods, bank or ACH details, or a payment link.
How do sales tax and economic nexus work after Wayfair?
Nexus is the connection that lets a state impose a collection duty. Physical activity, people, inventory, facilities or other in-state conduct can create nexus. In South Dakota v. Wayfair, the Supreme Court removed the federal physical-presence barrier and upheld South Dakota's economic-nexus regime. It did not create one threshold for every state.
States now use different sales amounts, transaction tests, exclusions, measurement periods and effective dates, and several have removed transaction-count tests. Marketplace-facilitator rules can also put collection on the marketplace for covered sales without removing every seller duty. Review each state's current statute and guidance before registering or collecting.
| Question | What to check | Why it matters |
|---|---|---|
| Do you have nexus? | Physical and economic activities under that state's current rules | Determines registration and collection duties |
| Is the sale taxable? | Product, service, customer and exemption rules | Determines whether tax is charged |
| Which rate applies? | State sourcing rules and local jurisdictions | Determines the correct combined rate |
| Who collects? | Direct seller or marketplace facilitator | Prevents duplicate or missed collection |
Exempt sales, resale, and exemption certificates
Not every sale is taxable, and many B2B transactions are not. Two common situations remove the sales tax line from an invoice. First, resale: when you sell goods to a buyer who will resell them rather than consume them, the buyer gives you a resale certificate, and you do not charge sales tax because tax will be collected at the eventual retail sale. This avoids tax being charged at every step of the supply chain.
Second, exemption certificates: certain buyers (such as government bodies, qualifying nonprofits, manufacturers buying production inputs, or farmers) and certain product categories (often groceries, prescription drugs, or some services) are exempt under a given state’s rules. When a buyer claims an exemption, you collect and keep a valid exemption certificate on file and issue the invoice without tax. The certificate is your evidence, during an audit, that the untaxed sale was legitimate, so keep it.
Many professional services are not subject to sales tax in many states, although this is shifting as states expand tax to specific services and to digital products. The safe approach is to confirm, for each state where you have nexus, whether your particular goods or services are taxable before deciding to leave tax off an invoice.
Contractors, W-9, and 1099 forms
A payer can request Form W-9 to obtain a US payee's correct name, federal tax classification and Taxpayer Identification Number. The payee gives the W-9 to the requester, not routinely to the IRS, and should transmit it securely rather than attaching it to every invoice.
For payments made in 2026, a business generally files Form 1099-NEC when reportable nonemployee compensation to a covered payee reaches $2,000. The threshold was $600 for payments made before 2026 and is indexed after 2026. Corporate and payment-type exceptions apply, while backup withholding can trigger reporting regardless of amount. Use the IRS instructions for the payment year.
US invoicing questions
Does the United States have VAT on invoices?
No. The United States has no federal VAT and no national sales tax. Instead, consumption tax takes the form of state and local sales taxes set independently by states, counties, and cities. An invoice adds sales tax only where the seller has nexus in the buyer’s state and the sale is taxable, so many invoices carry no tax line at all.
What does a US invoice need to include?
There is no federally mandated invoice format in the US, but a clear invoice should include your business name and contact details, the customer’s details, a unique invoice number, the issue and due dates, itemized goods or services with quantities and prices, a subtotal, any applicable sales tax as a separate line, the total due, and payment instructions.
When do I have to charge sales tax?
Collection generally depends on nexus, registration, the taxability of the sale, sourcing, exemptions and any marketplace-facilitator rule. Economic thresholds and measurement periods differ by state and change. Do not use South Dakota's Wayfair threshold as a nationwide test.
What is economic nexus after the Wayfair decision?
Economic nexus lets a state impose collection duties based on economic activity without physical presence. Wayfair removed the federal physical-presence rule and upheld South Dakota's regime; each state sets its own threshold, exclusions, period and effective date.
What is a resale or exemption certificate?
A resale certificate is provided by a buyer who will resell the goods, allowing you to invoice without sales tax because tax will apply at the final retail sale. An exemption certificate is provided by an exempt buyer, such as a government body or qualifying nonprofit, or for an exempt product category. In both cases you keep the certificate on file as evidence and issue the invoice with no tax.
How do W-9 and 1099 forms relate to my invoices?
They are separate from the invoice. A payer can request Form W-9 for the payee's name, classification and TIN. For payments made in 2026, the general Form 1099-NEC threshold for covered nonemployee compensation is $2,000, with exceptions and backup-withholding rules. Check the instructions for the payment year.