What is Sales Tax?

Sales tax nexus is a term that refers to the presence of a business in a particular jurisdiction, which triggers the obligation to collect and remit sales tax. In general, a business has sales tax nexus in a jurisdiction if it has a physical presence there, such as a brick-and-mortar store or warehouse. However, the exact definition of sales tax nexus can vary depending on the jurisdiction. For example, some states consider a business to have nexus if it has employees or independent contractors working in the state, or if it regularly solicits sales in the state through advertising or other means.

Here are some examples of how sales tax nexus works:

• If a business has a physical store in a state that has a sales tax, the business would have sales tax nexus in that state. This means that the business would be required to collect and remit sales tax on sales made to customers in the state. For example, if the business sells clothing and has a store in a state with a 6% sales tax rate, it would be required to collect sales tax on the clothing that it sells to customers in the store.

• If a business is based in one state but has employees who work in another state that has a sales tax, the business may have sales tax nexus in the second state. This could be the case if the employees are working in the second state for a significant amount of time, or if they are performing certain tasks that are considered to be part of the business's regular operations. In this case, the business would be required to collect and remit sales tax on sales made to customers in the second state.

• If a business is based in one state but regularly solicits sales in another state through advertising or other means, the business may have sales tax nexus in the second state. This could be the case if the business is running ads on TV, radio, or other media in the second state, or if it is sending direct mail or email to customers in the state. In this case, the business would be required to collect and remit sales tax on sales made to customers in the second state.

These are just a few examples of how sales tax nexus can affect a business. The specific rules and requirements can vary depending on the jurisdiction, so it's important for businesses to understand the rules in the states where they operate in order to ensure that they are properly collecting and remitting sales tax.

Use tax is a type of tax that is levied on the use, storage, or consumption of goods or services that are purchased from out-of-state vendors or online sellers who do not collect sales tax. Use tax is typically imposed at the same rate as the sales tax in the jurisdiction where the goods or services are used, stored, or consumed. The use tax is paid by the consumer, who is responsible for reporting and paying the tax to the government, either directly or through a self-reporting system. Use tax is intended to level the playing field between in-state and out-of-state vendors, and to ensure that all taxable purchases are subject to the appropriate tax.

Excise tax is a tax that is levied on certain goods and services, typically those that are considered to be luxury items or those that are harmful to health or the environment. Excise taxes are typically imposed at the federal or state level, and they are typically a fixed amount per unit of the good or service being purchased. For example, there may be an excise tax on cigarettes, alcohol, or gasoline. The purpose of excise taxes is to raise revenue for the government, and to discourage the consumption of certain goods and services that may be harmful.

Here are some examples of how excise tax works:

• If you purchase a pack of cigarettes in a state that has an excise tax of $2.50 per pack, the excise tax on the purchase would be $2.50, which would be added to the price of the cigarettes. So, if the cigarettes cost $6.50, the total cost with the excise tax would be $9.00 ($6.50 + $2.50 in excise tax).

• If you purchase a bottle of alcohol in a state that has an excise tax of $0.20 per fluid ounce, the excise tax on the purchase would be $4.00 for a bottle that contains 20 fluid ounces ($0.20 x 20 = $4.00). So, if the bottle of alcohol costs $20.00, the total cost with the excise tax would be $24.00 ($20.00 + $4.00 in excise tax).

• If you purchase a gallon of gasoline in a state that has an excise tax of $0.30 per gallon, the excise tax on the purchase would be $0.30. So, if the gallon of gasoline costs $3.00, the total cost with the excise tax would be $3.30 ($3.00 + $0.30 in excise tax).

These are just a few examples of how excise tax works. The specific details and rates can vary depending on the jurisdiction and the type of goods or services being purchased. It's important to understand the excise tax rules in your area in order to properly calculate and pay the tax on taxable goods and services.

There are five states in the United States that do not have a statewide sales tax: Alaska, Delaware, Montana, New Hampshire, and Oregon. However, even in these states, local governments may impose their own sales taxes. For example, some cities and counties in Alaska have a local sales tax, and there are also various other taxes, such as an excise tax on alcohol, that may be applied in these states. So, while it is correct to say that these states do not have a statewide sales tax, it is important to keep in mind that there may still be taxes on goods and services in these states.

Value-added tax (VAT) is a type of consumption tax that is placed on a product whenever value is added at each stage of the supply chain, from production to the point of sale. The tax is calculated as a percentage of the sales price of the product, and it is levied on the buyer at each stage of the supply chain. The seller collects the tax from the buyer and then remits it to the government. VAT is different from a sales tax, which is only charged at the point of sale to the final consumer. VAT is commonly used in many countries around the world as a way to raise revenue for the government.

Here are some examples of how VAT works:

• If you purchase a new television for $500 from a retailer in a country that has a 10% VAT rate, the VAT on the purchase would be $50, which would be added to the price of the television. So, the total cost of the television would be $550 ($500 + $50 in VAT). The retailer would collect the $50 in VAT from you at the time of the sale and then remit it to the government.

• If you purchase a meal at a restaurant in a country that has a 20% VAT rate, the VAT on the purchase would be $20.00, which would be added to the price of the meal. So, if the meal costs $100, the total cost with the VAT would be $120 ($100 + $20 in VAT). The restaurant would collect the $20 in VAT from you at the time of the sale and then remit it to the government.