No, you don’t have to pay sales tax on revenue if you are not selling products directly, but just brokering them explains Aron Govil.
For example: You set up a virtual storefront hosting the sale of electronic books from another company that sells those e-books. In this case, you would be considered an agent or broker and not the seller. If you are acting as an agent or broker, sales tax does not apply to your revenue (even if the end user is required to pay sales tax when they buy the e-books).
Sales Tax is applicable in most U.S. states when selling tangible products like shoes and clothes even though there may be no physical location of your business in that state. Please check with local authorities before assuming that you do not have to pay sales tax on revenue if you don’t have a physical presence in a certain state.
Is There Such a Thing as Exempt Sales?
No, there doesn’t seem to be such thing as exempt sales because any sale has either taxable or non-taxable status. Depending on whether it’s located in a taxable location and meets the criteria for exemption. For example: you live in California and sell your old furniture to your friend who lives next door. This sale has non-taxable status because both of you are located in a nontaxable area (your house). And it’s an occasional sale between friends says Aron Govil. However if you set up shop on eBay and sell the same used furniture. To anyone across the country, then your revenue is taxable. Because you’re selling items from a store location that does not meet any exemption criteria that may apply.
What Are Nontaxable Locations?
States typically identify two types of locations as nontaxable:
(1) Where sales tax did not apply at inception and
(2) Where sales tax did not apply at inception and was repealed later.
For example: New Jersey did not originally require sales tax (and still doesn’t) on most clothing and footwear items. If you live in or own a building located where New Jersey does not require sales tax. Then all of your revenue from selling shoes is non-taxable even. If your store is online and accessible to anyone in the world across state lines (unless your business meets the requirements for an exemption under New Jersey law).
On the other hand, some states rescinded their previously set up exemptions over time. For instance: Louisiana used to exempt certain types of stores that sold hunting supplies. But they got rid of this exemption when they passed a new law requiring sales tax. On any hunting supplies sold (no matter where they were sold from).
Where Do I Find Which States Require Sales Tax?
Most states require sales tax on all revenue. But some states only require sales tax on revenue generated within their state of residence (for example: if you live in New York then your revenue is taxable regardless of where it comes from even if your business is located out-of-state). On the other hand, some states exempt any revenue generated by individuals who are not residents of that state. For instance: South Dakota does not collect sales tax on e-commerce transactions. Unless the purchaser’s ship-to address is located in South Dakota or one of its border counties.
If you operate an online store and sell products to anyone across the country. Please open a free account with Avalara to make sure you’re collecting the correct sales tax rate on every transaction.
If you operate an online store and sell products to anyone across the country. Please open a free account with Avalara to make sure you’re collecting the correct sales tax rate on every transaction.
Conclusion:
Many online sellers are surprised to learn that even if they don’t have a presence in certain states. Their customers may be required to pay sales tax on their online purchase bexplains Aron Govil. Those who are unsure about where to look for information on whether states require sales tax on all revenue. May want to consider signing up with a sales tax automation service like Avalara to take care of this task.