---
title: "What is Sales Tax Sourcing?"
description: "Sales tax sourcing determines where sales tax is applied and collected when a transaction occurs."
canonical_url: "https://support.taxcloud.com/articles/what-is-sales-tax-sourcing-rT1gysyK9t"
md_url: "https://support.taxcloud.com/articles/what-is-sales-tax-sourcing-rT1gysyK9t.md"
---
# 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.


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## 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.


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## State-by-State List

### Origin-Based States (in-state sales follow seller’s location)


 1. Arizona
 2. California \* (state, county, city taxes from origin; district taxes from destination)
 3. Illinois
 4. Mississippi
 5. Missouri
 6. New Mexico
 7. Ohio
 8. Pennsylvania
 9. Tennessee
10. Texas
11. Utah
12. Virginia

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

### Destination-Based States (tax based on buyer’s location)

* 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


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## Additional Context: Remote Sellers & Nexus

* 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. 
* 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.