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Do I Have to Charge Sales Tax? How Do I Charge Sales Tax?

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Question: Do I Have to Charge Sales Tax? How Do I Charge Sales Tax?
Answer:

Charging Sales Tax
Businesses which sell products and some services are required by the state in which they do business to collect sales tax, at the applicable sales tax rate for that state (including local option taxes). The sales tax rate is added to the price of the goods/services by the merchant.

Sales tax is a trust fund tax, meaning that when you collect the taxes, you are doing so on behalf of the state, and you are required to turn this money back to the state in a timely manner.

Periodically, businesses which have collected sales tax must pay the tax to the state department of revenue. Only Alaska, Montana, New Hampshire, Oregon, and Delaware do not charge sales tax.

In general, you must charge sales taxes on all goods and services you sell within your state or to state residents. Sales taxes are due and payable when the merchandise is given to the customer or when the work is performed, not when payment is made.

You must charge sales tax in addition to the price of the item you are selling. You cannot advertise or in any way indicate that the sales tax is being absorbed or paid by the retailer (you). You may include the sales tax in the price (for example, if you are selling baked goods at a flea market or concessions at an event), but you must post a notice or show on the receipt that the purchase price includes the sales tax.

Online Sales
In 1992, in the Quill decision, the Supreme Court ruled that retailers are only required to charge sales taxes if the retailer has a physical presence in the state. In the past few years, states are attempting to enact legislation requiring affiliates to pay these taxes. Check with your state Department of Revenue for more information.

Back to Answers to Common Questions about Sales Taxes

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