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US Sales Tax

US Sales Tax

A sales tax is a government-imposed tax levied on the sale of goods and services. Forty-five U.S. states and the District of Columbia have a sales tax. The state sales tax is levied at the time of sale, collected by the seller and passed on to the government. Businesses are responsible for sales taxes in their jurisdictions if the company is located in a state with nexus.

Sales TAX information

In America, each state has its laws, so sales tax by state can vary for different categories of goods. In addition, taxes are regulated according to political and economic needs and requirements. However, sellers suppose to pay sales tax to the government.

What is nexus?

In all states, nexus is defined differently, but most described as a physical presence of economic connection. As a business, you only need to charge your clients by a sales tax in the states where you have sales tax nexus. So how to know if your company owns sales tax nexus?

Here are some points:

  • If you have a representative, office, or even a home office in the state;
  • If you have employees in that state;
  • If you store goods in that state;
  • If you use Amazon FBA or other inventory storage services in that state;
  • If you have any third party branches in the state;
  • Even if you are temporarily trading in a particular state, for example, you are at an exhibition or fair.

If the state you trade has a sales tax, you must collect the state sales tax yourself from the state’s residents. Each state has a different total sales tax rate.

Also, it is crucial to mention Economic Nexus. Economic Nexus applies to the sellers selling for the out-of-state customers and are above the revenue or sales threshold in that specific state. The states’ thresholds for economic nexus are different in each and every state individually, but the most common threshold for economic nexus is annual $100 000 revenue or 200 transactions in the state.

Economic nexus could be applied for the sellers:

  • Physical presence (for example, brick-and-mortar location);
  • Digital presence (for example, online sales).

1

How sales TAX is calculated?

So how much is sales tax? Sales tax can be calculated by multiplying the purchase price by the applicable total sales tax rate. Sellers collect sales tax on the sale of a good or service. Usage taxes are levied on the buyer who does not pay sales taxes at the time of purchase. All the information about the total sales tax rate and how much is sales tax is provided in the sales tax lookup.

2

What is the difference between VAT and U.S. sales TAX?

Sales tax applies only to retail, and VAT applies everywhere. However, where goods are resold more than once in the retail trade, the sales tax on the same goods may be charged each time the same goods are resold.

Sales tax is applied only at the final stage of the supply chain, and VAT is used in each supply chain step. However, where goods are resold more than once in the retail trade, the sales tax on the same goods may be charged each time the same goods are resold.

Sales Tax rates by states

Sales Tax rates by states

Tools and resources

1stopVAT calculator determines the sales tax and total amount to charge inclusive or exclusive of sales tax.

Sales tax calculator

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