The United States doesn’t levy a federal sales tax, but many of its states do. And within those states, various sales tax rates may be charged based on the county in which the seller is located. With all of these variances, it’s important that you take time to determine your small business sales tax liabilities.

But first…

What is sales tax?

Sales tax is a tax many states choose to levy on customers when buying a product or service. Business owners must collect and report that tax to the state’s taxation authority and, often, to their city or county tax administrator.

Which states collect sales tax?

Currently, 45 states and the District of Columbia collect a statewide sales tax, and local sales taxes are collected in 38 states. As of early 2020, the following states collected state or local sales tax:

*Salem County, New Jersey, collects a local tax and is not subject to the statewide sales tax.

Important note: Tax laws change. Please connect with your state and local taxing authority to learn about current tax obligations.

Is my business required to collect sales tax?

Small business sales tax rules can be a bit complicated, but if you sell goods or services to an end consumer or end user (rather than to a distributor) from a physical storefront, you are generally required to collect sales tax. It’s also likely you’ll collect sales tax in states in which your business has a “nexus,” which usually means your business has a physical presence or exceeds a certain sales threshold within the state.

Specific nexus regulations vary by state. You can find an overview of legislation at salestaxinstitute.com.

In most circumstances, if you do not meet the requirements for having a nexus in a state, you won't have to collect and remit sales taxes to that state’s tax authority. However, some states are making moves to ensure that sales taxes are charged in every sale. If you make sales in multiple states, you should contact those states’ taxing authorities and learn about the requirements you must fulfill.

How can I learn about my state's sales tax rules?

You’ll need to contact your state’s tax authority—and often, your city or county tax department—to learn about your tax obligations.

If you plan to make sales or have a presence in multiple states, pay close attention to the discrepancies between tax authorities, which may include any of these important points:

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You can connect with each state’s tax authority through the links or phone numbers provided below:

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To contact the sales tax department in Washington, D.C., visit mytax.dc.gov or call (202) 727-4829.

Where can I go if I need more help?

There are some groups that can help you determine where you have established a nexus and walk you through your sales tax obligations. These groups include:

Avalara | Tackle Tax Compliance

Avalara is software for automated tax compliance. Whether you are selling online, starting a new business, or need help filing internationally, Avalara may be able to help. Visit their website to learn more about their services.

TaxConnex | Your Outsourced Sales Tax Department

TaxConnex tracks changes to state tax regulations, and through its consulting practice, it can help your business by examining your risk and coaching you through staying in compliance. Follow this link to learn more about TaxConnex and how it can help your business.

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