5 Things You Might Not Know about Sales Tax

The old saying goes that “Nobody is boring once you get to know them.” But can the same be true for a concept like sales tax? Nothing can make a little percentage tacked onto the sale of a product interesting, can it?

We here at TaxJar live and breathe sales tax and we beg to differ! These 5 things you might not know about sales tax are guaranteed to amuse and delight. (Or at least to give you a new understanding of this much maligned administrative task!)

Sales Tax is Administered by Individual States

 When we think tax here in the U.S. we usually think “IRS” or “Uncle Sam.” But sales tax is actually administered by individual states. And every state has different rules and regulations. That’s one of the reasons sales tax compliance is so complicated for business owners. There’s actually no “federal” sales tax in the U.S.

 Sales Tax is Fairly New

While there are hieroglyphics that seem to depict a sales tax in ancient Egypt, sales tax as we know it in the U.S. is fairly new. West Virginia was the first state to enact a sales tax back in 1921, but more states piled on the bandwagon after the stock market crash of 1929. Just like today, states needed money and were looking for creative ways to get it!

 How Often You File Sales Tax is Tied to your Sales Volume

As a business owner, you may file sales tax monthly, quarterly or annually. If you have to file sales tax in more than one state, you may end up filing monthly one in state but annually in another. That’s because states generally want you to file more often based on the amount of sales volume to buyers in that state.

You May Have “Sales Tax” Nexus” in Other States and Not Realize it

Speaking of filing sales tax in multiple states, you may be on the hook for sales tax in a state and not even realize it. Many business activities create sales tax nexus, including:

  • Having an employee, contractor, repairperson or salesperson in a state
  • Storing products in a state
  • Having a 3rd party affiliate in a state
  • Selling at a tradeshow or craft fair in a state

Check here to find out more about where you might have sales tax nexus.

Some States Don’t Have Local Sales Tax Rates

Quick! Check the sales tax rate at your location by going to TaxJar Mobile. Do you see a jumble of state, city, county and local rates? Then you’re like most people. All these rates can make it hard for you as an online seller to determine how much sales tax to collect. But a handful of states are kind and they don’t allow local rates. Connecticut, for example, has a 6.35% sales tax rate. So if you have nexus in Connecticut, you only charge that 6.35% sales tax rate to Connecticut buyers across the board. Simple!

We hope this post has given you a deeper understanding of this much maligned small business task. Do you have sales tax questions? Start the conversation in the comments!

Mark Faggiano is the founder and CEO of TaxJar, a service built to make sales tax compliance simple for eCommerce sellers. Try a 30-day-free trial of TaxJar today and eliminate sales tax compliance headaches from your life!