A Clear Perspective
A Clear Perspective
Sales Taxes
Sales Taxes
Each state rules regarding the taxability of products and services differ. In general, sales tax is imposed on all sales of tangible personal property, unless otherwise exempt (i.e. motor vehicles recently titled in GA), and only specifically enumerated services in some states.
Sales tax obligations apply to all sellers, regardless of business size or model (if you operate from a bricks-and-mortar location or through an on-line shopping cart) and they depend on two important concepts: nexus, and origin-based or destination-based tax.
Nexus is the quality or quantity of contacts a business must have within a state before that state may exercise its taxing jurisdictions on an entity. Traditional nexus was a " physical presence" concept - having an office, an employee, a warehouse, an affiliate or storing inventory in a state. Recently there is another definition of nexus, the "economic nexus" - making a certain amount of sales in a state (either a certain dollar amount or a certain number of transactions).
Origin-based sales tax states are fairly simple. If you are based in an origin-based state, you charge the amount of state and local sales tax effective at your business’ location to everyone who you ship taxable items to in that state. So your location would be your office, warehouse, place where your inventory is stored, etc.
Destination-based sales tax states are trickier. If you have sales tax nexus in a destination-based state, you must calculate the sales tax rate effective where your buyer is located. This means you would charge multiple sales tax rates within a state. To make things more complicated some states are different also based on whether you live there (home state nexus) or you are considered a “remote seller.”
If you are in the business of selling products and need clarification about the multitude of aspects regarding the sales tax process contact us to get a clearer perspective!