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Sales and Use Tax

Sales tax is imposed on the sale of goods (also known as tangible personal property) and on certain services in your state. Use tax is imposed on goods purchased out of state and brought into the state for "use, storage, or other consumption," the purchase of which would have been subject to the sales tax had the transaction occurred within the state.

Sales Tax
In most states and in many cities, your business must collect sales taxes on applicable sales. Generally, sales taxes apply on the sale of just about anything to just about anyone.

Exceptions are sales to resellers, such as wholesalers or retailers, who have valid state resale certificates. Another exception is sales made to tax-exempt institutions, such as public schools and libraries. In some states, sales taxes apply only to products, while in other states, sales taxes apply to services as well.

A rapidly changing rule is the collection of sales tax by firms that sell products or taxable services in states where they do not maintain a clear physical presence. Physical presence is clear if you have an address, store inventory, or maintain an employee such as a sales representative, within a state. But, the definitions of physical presence are changing. If you make taxable sales in other states, you should check with your accountant for an up-to-date opinion on your particular situation. The safest route, of course, is to simply collect sales tax in every state where you sell products or services.

Use Tax
Use taxes basically mean that a business that buys items from out-of-state vendors, which are not collecting sales taxes, must pay the tax themselves to the taxing authority. As a general rule, a state's taxing power reaches only as far as its borders. However, some states are particularly aggressive about collecting such taxes and won't hesitate to push gray areas of the law in an effort to collect every bit of tax that they can.

Excise Tax
Excise taxes are taxes paid when purchases are made on a specific good such as gasoline. Excise taxes are often included in the price of the product. There are also excise taxes on activities such as wagering or highway usage by trucks. Excise Tax has several general excise tax programs. One of the major components of the excise program is motor fuel.

Use the following links for more information about sales, use, and excise taxes.

How do you know when to charge, or pay, the appropriate sales or use tax?
An overview of state sales tax rates in the United States.
This Web page has a clickable map that shows sales tax return deadline dates for the 50 states, District of Columbia, and Puerto Rico.
This Web page contains links to each state's (and the District of Columbia's) revenue department, the agency responsible for collecting business taxes.
The IRS guide to excise tax.

Source: Streetwise Small Business Start-Up
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