Go To Great Panes

During the course of business many sales tax issues can come up. Below I’ve compiled a list of questions that will get you the general information you need to know about your state’s sales tax laws.

Look for answers to the questions below on your state’s website, the paperwork they sent you when you registered or give them a call and ask one of your state’s employees. That’s how to best get facts about your state’s laws, not someone else’s interpretation or opinion. There are links to all the USA official state websites on the IRS website, there’s a link in our IRS blog post The IRS Website–Links for Businesses to that page–see “State Links from the IRS” near the end of the post.

Sales tax laws are different from state to state and the answers to the questions below vary widely. The issues below have sent me back to New York State’s website for more info, and occasionally led me to call the NYS Dept. of Revenue for answers. Sometimes I call twice, just to be sure the first person was clear on my question and that I got the answer right.

• Must I register to collect sales tax in my state?

You may think your business is too small or that you are just a hobby seller therefore you don’t need to register to collect sales tax for your state. From what I’ve seen, that’s probably not true. Many states require you register before you start selling, regardless as to whether or not you ever make a sale to someone in your state, make a sale at all or turn a profit.

• Is there an amount of sales I can make before I am required to register?

Most states with sales tax require you to register straight away–there’s usually no “You can sell $XXX worth of goods before registering to collect sales tax” rule. Usually it’s “Intend to make a sale? Register before you start selling”.

• Can I just include sales tax in my price?

Some states allow it, some don’t, and some allow it so long as you mention tax is included. There may be other stipulations, but none I have heard of off-hand.

• Can I just pay the sales tax for my customers?

Some states allow it, some don’t. Some allow it so long as you don’t advertise it.

• Can I advertise that I pay sales tax for my customers?

Some states have specific laws about publicizing that you will pay sales tax for your customers.

• Must my receipts to customers specify the amount of sales tax the customer paid and/or state that sales tax is included in the purchase price?

Some states require that you show how much tax the customer has paid/you paid for the customer. If the customer doesn’t know how much tax they paid, they won’t know if “use tax” is due on their purchase. (Use tax is due on purchases that should have had tax collected by the seller but didn’t. Many (most/all?) states with sales tax also have use tax which applies to internet and mail order purchases where the seller didn’t collect sales tax, though many people think that purchases from the internet are tax-free.)

• Are there different rates depending on the items or services I provide?

Some states have different rates for food, clothing, shoes, services… be sure to understand how they apply to your business.

More to come….