US Sales Tax Filing Requirements Introduction
- Introduction to US Sales Tax
Sales tax for the US consists of state, local, and other local taxes that may arise, and local sales tax rates vary from place to place. The following states and the District of Columbia only levy a state-level sales tax: Connecticut, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, and Rhode Island. The only states without a state-wide sales tax levy are: New Hampshire, Oregon, Montana, Alaska, and Delaware. However, Alaska does have local sales taxes levied by local jurisdictions.
As of 2020, Colorado has the lowest sales tax rate, 2.9 percent, whereas California has the highest state general sales tax rate, 7.25 percent.
- General Principles of Traditional Sales Tax Collection
Sales tax is levied on most tangible products and certain services. Levied on the end user or end consumer. Sales of tangible personal property are generally taxable unless specifically exempted, such as resale or wholesale is usually exempt from sales tax. Services are generally non-taxable unless specifically included: Examples of taxable services include public utility services, admissions to public events, data processing, and barber and beauty salon services. In addition, some states, such as Hawaii and South Dakota, tax a broad variety of services. Sales of intangible property are generally not subject to tax, Examples include the sale of stocks, bonds, copyrights, trademarks, and other intangibles. Sometimes it is difficult to tell whether certain products should be treated as tangible or intangible property (customized computer software), sales of real estate are generally not subject to sales and use tax.
Generally, a seller must have a “taxable nexus?in a state before the state can require the seller to collect and remit sales and use tax. For a state to impose its sales and use tax on a taxpayer, the taxpayer must have a physical presence in the state. If a taxpayer has sufficient ties to a state, it is deemed to do business in that state and be responsible for that state’s taxes. Sellers who sell outside of the customer’s state are not taxed. Sellers who have salespeople, agents, or other representatives regularly visiting customers in the state are taxed.
Use tax is a complementary tax. Primarily a tax levied on the storage, use, and consumption of taxable products or services for which no sales tax has been paid. It applies to the case where the product purchased out-of-state is used in the state, and also applies to the purchase of tax-free products, but the usage is taxable.
- Remote Sellers Apply Economic Nexus Principles to Levy Sales Tax
In addition to paying sales tax for a company with a physical presence in the United States, sales tax is also required if there is an Economic Nexus. This is the main principle for determining whether it is necessary to collect sales tax from customers when engaging in e-commerce business in the United States. Since June 21, 2018, the Wayfair lawsuit in South Dakota, USA, has redefined the generation of sales tax and use tax obligations, also known as Economic Nexus. Economic nexus is essentially sales tax nexus for online sales. Economic nexus is when a seller must collect sales tax in a state because they earn above a sales or revenue threshold in that specific state. This means that you don’t have to have a physical presence in a state in order to collect and remit sales tax for that state.
Each state with economic nexus laws sets its own threshold that businesses must meet to have economic nexus. States?thresholds for economic nexus vary. However, the most common economic nexus threshold is when a seller reaches $100,000 in sales or 200 transactions in a state annually.
The below chart provides you a summary of the economic nexus thresholds by states updated in June 2022. For more details, please consult with our consultants.
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State
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Nexus Effective Date
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Remote Seller Threshold
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Alabama
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10/01/2018
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Annual Alabama sales in excess of $250,000 based on the current or previous calendar year’s sales (excluding sales through a registered marketplace facilitator).
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Alaska
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01/06/2020
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$100,000 sales to the state, or 200 sales transactions into the state in the current or previous calendar year.
Note: Alaska Remote Seller Sales Tax Code was passed on January 6, 2020. However, from there local jurisdictions decide whether to adopt the code.
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Arizona
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10/01/2019
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$100,000 in sales to the state in the current or previous calendar year (excluding sales through a marketplace).
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Arkansas
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07/01/2019
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200 transactions or $100,000 in sales in the current or previous year (excluding sales through a registered marketplace).
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California
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04/01/2019
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$500,000 in sales in the current or previous calendar year.
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Colorado
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12/01/2018
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$100,000 in sales in the current or previous year.
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Connecticut
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12/01/2018
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$100,000 in sales and 200 separate transactions within the 12-month period ending on September 30 immediately preceding the monthly or quarterly period when liability is established (excluding sales through an online marketplace)
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Delaware
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N/A
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N/A
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Florida
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07/01/2021
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$100,000 in sales in the current or previous year.
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Georgia
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01/01/2019
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$100,000 in sales or 200 separate sales in the current or previous calendar year.
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Hawaii
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07/01/2018
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$100,000 in sales or 200 separate transactions in the current or previous calendar year.
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Idaho
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06/01/2019
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$100,000 in sales in the current or previous calendar year.
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Illinois
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10/01/2018
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$100,000 in sales or 200 separate transactions, quarterly review based on preceding 12-month period (excluding sales through a marketplace facilitator).
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Indiana
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10/01/2018
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$100,000 in sales or 200 separate transactions in the current or previous calendar year.
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Iowa
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01/01/2019
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$100,000 in sales in the current or previous calendar year.
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Kansas
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07/01/2021
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$100,000 in sales in the current or previous calendar year.
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Kentucky
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10/01/2018
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$100,000 in sales or 200 separate transactions in the current or previous calendar year.
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Louisiana
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07/01/2020
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$100,000 in sales or 200 separate transactions in the current or previous calendar year.
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Maine
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07/01/2018
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$100,000 in sales in the current or previous calendar year.
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Maryland
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10/01/2018
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$100,000 in sales or 200 separate transactions in the current or previous calendar year.
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Massachusetts
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10/01/2019
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$100,000 in sales in the current or previous calendar year.
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Michigan
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10/01/2018
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$100,000 in sales or 200 separate transactions in the current or previous calendar year.
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Minnesota
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10/01/2019
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$100,000 in sales or 200 separate transactions in the previous 12-month period.
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Mississippi
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12/01/2017
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$250,000 in sales in the previous 12-month period.
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Missouri
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01/01/2023
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$100,000 in sales in the current or previous calendar year, determined quarterly.
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Montana
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N/A
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N/A
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Nebraska
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01/01/2019
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$100,000 in sales or 200 separate transactions in the current or previous calendar year.
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Nevada
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10/01/2018
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$100,000 in sales or 200 separate transactions in the current or previous year.
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New Hampshire
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N/A
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N/A
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New Jersey
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11/01/2018
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$100,000 in sales or 200 separate transactions in the current or previous calendar year.
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New Mexico
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07/01/2019
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$100,000 in sales in the previous calendar year.
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New York
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06/21/2018
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$500,000 in sales and 100 separate transactions during preceding four sales tax quarters.
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North Carolina
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11/01/2018
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$100,000 in sales or 200 separate transactions in the current or previous calendar year.
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North Dakota
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10/01/2018
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$100,000 in sales in the current or last calendar year (excluding sales through a marketplace).
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Ohio
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08/01/2019
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$100,000 in sales or 200 transactions in the current or previous calendar year.
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Oklahoma
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11/01/2019
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$100,000 in sales in the current or previous calendar year.
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Oregon
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N/A
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N/A
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Pennsylvania
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07/01/2019
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$100,000 in sales in the current or previous calendar year.
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Puerto Rico
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01/01/2021
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$100,000 in sales or 200 separate transactions in the seller’s accounting year.
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Rhode Island
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07/01/2019
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$100,000 in sales or 200 separate transactions in previous calendar year.
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South Carolina
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11/01/2018
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$100,000 in sales in the current or previous calendar year.
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South Dakota
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11/01/2018
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$100,000 in sales or 200 separate transactions in the current or previous calendar year.
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Tennessee
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10/01/2019
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$100,000 in sales in the previous 12-month period.
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Texas
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10/01/2019
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$500,000 in sales in the previous 12-month period.
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Utah
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01/01/2019
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$100,000 in sales or 200 separate transactions in the current or previous calendar year.
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Vermont
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07/01/2018
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$100,000 in sales or 200 separate transactions during the previous 12-month period.
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Virginia
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07/01/2019
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$100,000 in sales or 200 separate transactions in the current or previous calendar year.
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Washington
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10/01/2018
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$100,000 in sales in the current or previous year.
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Washington DC
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01/01/2019
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$100,000 in sales or 200 separate transactions in the current or previous calendar year.
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West Virginia
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01/01/2019
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$100,000 in sales or 200 separate transactions in the current or previous calendar year.
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Wisconsin
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10/01/2018
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$100,000 in sales in the current or previous calendar year.
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Wyoming
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02/01/2019
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$100,000 in sales or 200 separate transactions in the current or prior year.
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Note: Many states base their threshold on sales OR transactions, while some states base their threshold on sales AND transactions.
- Filing Sales Tax Returns and Penalties
Most states require that, once registered for sales tax, sales and use tax returns must be filed within each required reporting period, regardless of whether there are sales. The filing frequency may be affected by differences in business type, sales volume, and tax payable. Sales and use taxes levied should normally be reported and paid to the relevant tax authorities when filing a tax return. Taxpayers face penalties such as late payment penalties and interest if they do not file their tax returns at the time of filing or in advance.
Penalties include late registration and late payment of taxes. If your company has met the " Nexus " criteria, it should be registered locally for sales and use tax before commencing taxable business. Failure to register as required can have serious consequences. For example, local tax authorities can retroactively apply sales and use taxes from the original date of operation to the present day and impose related penalties.
When a taxpayer fails to file a tax return or pay the full amount of tax on time, penalties are generally imposed based on the amount of unpaid tax. Taxpayers can request a waiver of the penalty by filing a written complaint with the state stating the reason for the delay. However, it is only possible to consider a waiver of fines if the cause is reasonable and beyond control.
Some states impose penalties of up to 100% of the additional tax due if there is willful evasion or incorrect reporting of the relevant tax.
- Sales Tax Filing and Fees
Sales tax can be filed quarterly or monthly. The service fee for quarterly filing is $150/time, and the monthly filing fee is $120/time. The above quotation is only applicable to the case where the state declaration does not exceed 5 counties/cities. If this limit is exceeded, please contact our professional consultants for specific quotations.
Notes:
- Our fee quoted above does not cover the courier charges during the sales tax declaration process, and the relevant taxes and fees that the company needs to pay to the tax department.
- Our fee quoted above excludes the taxes. If you request a tax invoice, value-added tax at the prevailing rate may be charged and collected.
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- Payment Time and Method
We currently accept Hong Kong Dollar checks, cash or TT, and credit card through PayPal only. If payment is settled through PayPal, extra 5% services fee will be charged. Upon receipt of your order, we will issue an invoice to you for your settlement. Then we will email the bill and payment bank information to you for your future payment arrangements. Because of the nature of services, we require full payment in advance. Also, once service is commenced, no service fee will be refunded except in special cases. |
