Sales Tax: What It Is And How It Is Imposed?

Executive Summary About Sales Tax: What It Is And How It Is Imposed? By Gray Rollins

State Sales Tax Rate

A sales tax is a tax that is placed on the purchases of goods or services. The federal government does not have a national sales tax.

Each state has the ability to impose their own sales tax rate. At the current time Oregon, New Hampshire, Montana, Hawaii, and Delaware are the only states that do not impose a state sales tax. It is possible for different counties inside these states to impose their own local sales tax.

The local sales tax generally depends on the preferences of local lawmakers and taxpayers. States that do impose a state sales tax also allow individual counties to impose an additional local sales tax. The combination of a local sales tax and a state sales tax is the total sales tax shoppers pay when purchasing taxable items.

In addition to imposing their own state sales tax, each state has the option of allowing tax exclusions on certain items. Each state will vary; however, it is not uncommon for certain foods and medications to be excluded from a state sales tax.

There are also many states that regularly offer sales tax breaks for a period of time. While a state government may impose a state tax break each local county has the option of doing so too. The majority of online business retailers will impose state tax when an item is purchased over the Internet; however, items purchased from a small online business or an online auction site are generally not taxed.

These types of purchases must be reported on an income state tax return. Each state is likely to use a different method for determining how much sales tax an individual must pay on items or services purchased without being taxed.

This allows many individuals to automatically apply their estimated state tax return to the amount of money they owe on any local or state sales taxes. As with traditional taxes owed, the amount of money owed on sales tax must be paid for by the April 15th tax deadline.

Navigating The Internet Sales Tax Laws

Executive Summary About Navigating The Internet Sales Tax Laws By Tim Knox

Q: Do I have to charge sales tax on orders placed on my Web site? What if I have international customers?

A: Online companies with a physical presence, or nexus, in a state are required to collect and report taxes on sales made to customers living within that same state. For example, if your online business is based in California, you must collect and report sales tax derived from fellow Californians making purchases on your site.

Internet sales taxation has always been a hot topic for those of us who make our living selling goods and services online. One of the more controversial points is that no one, including our own government, has a clue how to implement a fair and logical Internet taxation process.

There are more than 7,500 state and local entities collecting sales taxes in the United States, each with its own system of rates and rules. Online taxation has been a thorny topic for years.

Even before Amazon.com sold its first book or Priceline.com booked its first flight, foreword-thinking tax collectors knew the Internet might someday generate millions of dollars in taxable goods and services. Congress enacted a three- year moratorium on the collection of taxes to give an appointed advisory board time to come up with an acceptable solution.

Some states have been working to simplify their sales tax structures to make it easier for online merchants to charge and pay taxes, but a consensus is still a long way off. In order for Congress to approve any standard process, there will have to be a major simplification of individual state tax codes and a consensus among the states.

Many states are asking their citizens to take charge of the situation and voluntarily pay sales tax for purchases made online. In my home state of Alabama, for example, the sales tax collection department is airing radio spots asking Alabamians to step up to –and toss dollars into–the proverbial collection plate.

The commercial kindly suggests that if I have purchased anything from an online retailer, I am honor-bound to proclaim such purchases and submit the appropriate sales tax to the collection department right away. The good news for online retailers is, there’s no evidence that people buy online to avoid paying taxes or save money, for that matter. If saving a buck were the motive, no one would willingly pay shipping charges.

People shop online because it’s convenient to do so.

The Internet offers the ability to shop the worldwide market while sitting in the comfort of your own home – a convenience that most people are happily willing to pay for.

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