Let’s face it that our country has the most complicated sales tax system all over the world. Therefore, most sellers who intend to launch their online business rush to ask for a helping hand from professional tax experts like Prestige Auditor’s team. In order to help our customers Prestige Auditors have prepared a short guideline with basic facts concerning U.S. sales tax. You can also read this blog which is a perfect sales tax guideline for beginners.
Fact #1 United States Sales Tax Is Governed by Local Government!
It is hard to believe, but there is no federal sales tax in the United States. The main reason is that sales tax is set and governed by local governments. So, each of the states has its own sales tax rules and regulations.
Fact #2 United States Sellers Collect Sales Tax Only in Several States!
As we have mentioned before, sales tax rules vary in different states. But sellers are required to collect sales tax only in the state where their business is based. However, if you decide to expand your business, you should start collecting taxes from different states based on sales tax nexus. Sales tax nexus is your business’s presence in a certain state. Keep in mind that each state has different requirements concerning nexus law. But there are several basic requirements that every seller has to meet:
- A Location
- Personnel
- Inventory
- Drop shipping affairs
- An Affiliate or Partner
Once you have figured out that you have tax nexus in a certain state, you can confidentially start registering your sales tax permit in that state and start collecting sales tax.
Fact #3 Sales Tax Rates Can Vary from State to State!
Generally, each U.S. state implements its own sales tax rates. Usually, it varies from 2-6%. Additionally, most states permit local areas to add sales tax rates on top of that. So, as an e-commerce seller, you have to figure out the exact amount of sales tax that you are allowed to collect from your buyers. You can read this blog about the states with the worst sales tax rates.
Fact #4 Not Every Product Is Taxable!
As a rule, the biggest part of the United States tangible personal property is taxable. However, there are several exceptions that you should be aware of. There are a few states that have several exceptions. For example, grocery is not taxable in several states.
Fact #5 Taxable Shipping
In most states, shipping is considered to be a taxable part of online sales. If you sell online, then you are also responsible for the entire process of shipping. However, there are also several states where shipping is not considered taxable.
Let’s dive deeper, and try to figure out the states where shipping is taxable and those states which do not charge taxes for shipping the orders.
- Arkansas
- Connecticut
- District of Columbia
- Georgia
- Hawaii
- Illinois
- Indiana
- Kansas
- Kentucky
- Michigan
- Minnesota
- Mississippi
- Nebraska
- New Jersey
- And additional 15 states
Fact #6 Tax Administration Can Vary from State to State!
As an e-commerce seller, you should keep in mind that you must always be in touch with a state when it comes to collecting and reporting sales tax. The main reason is that sales tax can vary in different states. For example, there are several states that can ask you to provide more information during your sales tax permit’s registration. Or, there are states that require tax payers to file sales tax returns at different intervals. This process is pretty clear: the more profit you gain, the more often you have to file a sales tax return. Generally, most states require to file sales tax monthly, quarterly or annually.
There are no doubts that sales tax is a complicated process which requires much effort on your part. Therefore, it is so important to cooperate with a tax attorney when it comes to dealing with taxes.
Prestige Auditors is a service that makes the process of reporting and filing easier, since we are able to eliminate any issues within your taxes. It is crucial to understand how taxes affect your entire business. The range of services provided by Prestige Auditors is really wide: We can tell you how to get tax exempt on Amazon, Walmart sales tax exemption and everything concerning e-commerce taxation.
We suggest that you visit our website where you can find detailed information concerning our services.
66 West Flagler Street Suite 900 – #6076,
