What is Sales Tax Sourcing?

Sales tax sourcing determines where sales tax is applied and collected when a transaction occurs.

Origin-based sourcing means the tax rate is based on the seller’s location: state, county, city, and possibly local district where the business is located. You charge the same rate to every in-state buyer.
Destination-based sourcing means the tax rate is based on the buyer’s location: the delivery or destination address. Rates can vary widely depending on where the customer is located.

Why It Matters

Origin-based states are easier to manage for sellers, since they charge one rate statewide.
Destination-based states are more complex, requiring sellers to calculate taxes based on each buyer’s jurisdiction, which may require tax software or tools.

Arizona
California * (state, county, city taxes from origin; district taxes from destination)
Illinois
Mississippi
Missouri
New Mexico
Ohio
Pennsylvania
Tennessee
Texas
Utah
Virginia

California is a hybrid—it uses origin-based sourcing for state/county/city taxes but destination-based for district taxes.

Alabama
Arkansas
Colorado
Connecticut
District of Columbia
Florida
Georgia
Hawaii
Idaho
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Massachusetts
Michigan
Minnesota
Nebraska
Nevada
New Jersey
New York
North Carolina
North Dakota
Oklahoma
Rhode Island
South Carolina
South Dakota
Vermont
Washington
West Virginia
Wisconsin
Wyoming
New Mexico is sometimes listed as destination-based, depending on sources, but it’s also included in origin-based lists

Regardless of origin/destination rules for in-state sales, remote sellers (sellers without physical presence in a state but with “economic nexus” due to sales thresholds) are usually required to follow destination-based sourcing when selling into other states. TaxJar Quaderno
Some origin-based states (notably Arizona, California, New Mexico) may have unique or transitional rules for remote sellers, but destination-based sourcing is increasingly standard.