Origin vs Destination Based Sales Tax, Explained

Which rate applies, the seller's or the buyer's? It depends. Here is the distinction.

September 3, 2026 · 3 min read

Two ways to source a sale

Sales tax sourcing decides whose location sets the rate. Origin based sourcing uses the seller's location; destination based uses the buyer's. Which one applies depends on the state and the situation.

Destination is common for remote sales

For sales shipped to a customer in another state, destination based sourcing is the common rule, meaning you charge the rate at the buyer's address. That is why the same product can carry different tax for different customers.

Why it complicates checkout

Destination sourcing means you cannot use a single flat rate. The correct amount depends on exactly where each order ships, which is why an address level rate lookup matters.

Know the rule that applies to you

The right sourcing rule depends on your circumstances and the states involved. Understanding which applies keeps you from charging a wrong, and potentially costly, rate.

Key takeaways

Sourcing decides whose location sets the rate
Remote sales are commonly destination based
Destination sourcing rules out a single flat rate
Know which sourcing rule applies to your sales

Written by

Julien Jimenez

Julien Jimenez is an independent software builder based in Paris. He designs, ships, and operates focused SaaS products for small businesses and independent professionals. Read the full author page.