J.K. Lasser's Small Business Taxes 2013: Your Complete Guide to a Better Bottom Line

Sales and Use Taxes

There is no federal sales or use tax. But there are over 8,000 states, counties, cities, and towns with their own sales taxes, in many cases generating the greatest revenue for these jurisdictions. Many also impose a use tax.

Use tax Tax imposed on the purchaser of certain goods from out-of-state vendors.

The rules for these taxes vary considerably from 1 locality to another. For example, the sale of 1 type of product may be subject to sales tax in 1 state but exempt in another. Because these taxes produce significant revenue in some places, taxing authorities may be aggressive in their collection activities, so you should understand your responsibilities.

Sales Taxes

If you sell goods or provide certain services within a state that has a sales tax, as the vendor you are required to collect the tax from the purchaser and remit the tax to the state agency. Generally, the same test used for state income tax purposes to determine whether you do business within a state applies for sales tax purposes as well. If you do not do business within a state, you are not required to collect sales tax on goods shipped within that state. If you sell online, you may or may not have a presence in another state (for example, maintaining a server in another state may establish a nexus there).

Currently, it is not well established precisely when Internet sales to a customer in another state are subject to sales tax. The federal moratorium on state sales tax, titled the Internet ...