Is your state considering raising or adding a sales tax this election season? Many states put referendums on the ballot requiring an up or down vote on sales tax issues. It remains an unchanged part of the American voting season; find a gaping a hole in the state budget and encourage taxpayers to fill it.
Questions for businesses engaged in interstate commerce to consider.
How does the proposed tax hike affect business?
There are 50 states and 50 different ways to collect sales tax on residents and outsiders. Companies that do commerce across the country need to understand their obligations via payments, especially if they travel a lot. Most will collect use tax or sales tax but never both.
How do I know if I have a nexus within a state?
For most companies with a physical presence (building) within state boundaries the sales tax requirement of that state applies to the company. Determining a nexus or ‘sufficient physical presence’ is enough to collect in most cases. This gets murky with non-profits and e-commerce, but under normal rules sales taxes need to be paid and collected.
Which rate do I apply?
Determining which sales tax rate to charge is tricky because of the large number of states and various exemptions. If you sell in multiple locations within a state the point of sale system should adjust to the location of the buyer. Quickbooks has an application to configure the tax rate easily. Be sure the rate is correct to avoid fines collected retroactively.
What about online sales tax?
Some states made an agreement with sellers like Amazon to collect the sales tax of the state that the purchaser resides in. This keeps the revenue within state borders while giving Amazon (and others) a chance at possible retail locations in the future.
Businesses keen to avoid penalties should contact a professional partner to sort through the changing tax climate brought on by elections.