Sales tax: definition, example, and why it matters

Sales tax rates vary by state, county, and city. Most states tax parts/materials but exempt labor. Hawaii, New Mexico, South Dakota, and West Virginia tax most services. Glo Invoice supports per-line taxability.

• Short definition. A tax on the sale of goods (and sometimes services) collected from the customer at checkout.
• Category. Sales tax is a tax term used by service businesses when billing customers.
• How Glo Invoice handles it. Glo Invoice builds sales tax into the invoice itself, so you don't track it on paper or in a spreadsheet.

Frequently asked questions

What does sales tax mean?

Sales tax rates vary by state, county, and city. Most states tax parts/materials but exempt labor. Hawaii, New Mexico, South Dakota, and West Virginia tax most services. Glo Invoice supports per-line taxability.

Related terms

• Use tax — A tax owed on items bought tax-free and used in a state that would normally tax them.
• Exemption certificate — A document a buyer provides proving they're exempt from sales tax on a purchase.
• Tax nexus — A connection to a state that obligates you to collect that state's sales tax.