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How Sales is taxed?

A certain percentage is charged to a buyer on gross sale, which goes to the department of revenue or taxation. A sales tax is charged on gross receipts.
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Category : > Article Directory of Sales Tax Registration
Posted On : Mon Feb 08th,2010

A certain percentage is charged to a buyer on gross sale, which goes to the department of revenue or taxation. A sales tax is charged on gross receipts.

Same sales tax rules are applied whether sales is materialized through the internet or from the storefront.

Internet purchases are subject to the sales and use taxes in most states in the same manner all other purchases of items or services are subject to sales and use tax. If you paid the correct amount of the sales tax to the internet company you purchased the item from, you will not owe any additional sales or use tax. However, if the internet company did not collect any State or local sales tax, or you did not pay the correct amount of tax on the purchase of a taxable item or service, you must report the amount of any additional State and local sales or use tax due on your personal income tax return.

Generally, any type of business entity (individual, partnership, corporation, etc) that makes purchases of tangible personal property is subject to use tax, unless you previously paid required sales tax on the purchase to the vendor. Use tax can be thought of as a mirror of the sales tax.

Sales and Use Tax applies to receipts from retail sale, rental, or use of tangible personal property or digital property; The retail sale of producing, fabricating, processing, installing, maintaining, repairing, and servicing tangible personal property or digital property; maintaining, servicing, or repairing real property; certain direct-mail services; tattooing, tanning, and massage services; investigation and security services; information services; limousine services; sales of restaurant meals and prepared food; rental of hotel and motel rooms; certain admission charges; certain membership fees; parking charges; Storage services; sales of magazines and periodicals; delivery charges; and telecommunications services, except as otherwise provided in the Sales and Use Tax Act.

If you self-report the use tax due you will only owe the tax. If you wait until the Department of Revenue issues you a bill for the use tax due you will have to pay a xxx percent penalty, plus interest. Department of revenue Code requires use tax to be paid, unless at least an equal amount of the sales tax was paid on your taxable purchases.

Sales tax returns may be filed on a monthly, quarterly or annual basis. Your filing frequency is determined by the amount of state taxes due. The filing frequency is determined by the total state tax due on the return as a whole, not by each location.

Your filing frequency is reviewed by the Department of Revenue on an annual basis. If this review indicates that your filing frequency should be changed, the change will be made and notification will be sent to you.

In most States monthly returns are due on or by the 20th of the following month, except on quarter ending months. For example, your monthly February return is due on or before March 20. The due dates listed on the chart for quarterly returns should be followed when filing quarter ending months such as March, June, September and December.

Quarterly returns are due on or before the last day of the month following the end of the quarter. For example, your return for the January through March period would be due on or before April 30.

When the due date falls on a Saturday, Sunday or a holiday, your return will be considered timely filed if it is postmarked by the next business day.

Negative taxable sales cannot be filed for a location on the return.

You are not required to pay sales taxes on the products you bought from the other states. Like, you live in New York and bought tangible property, which is a taxable item and the delivery was made by the New York supplier then you are required to pay sales tax. But, if you bought any tangible property from the state of California and delivery was made to New York State then as a non-resident of state of California you are not required to pay sales tax.

When the credits allowed are greater than the tax collected, an amended return and Application for Refund/Credit must be filed for the period in which the sales were actually filed.

Gross receipts equal the total amount of sales your business had for the period in which you are filing the return.

Taxable sales equal the total amount of sales after you take into account those sales that are not subject to sales tax or add sales/purchases in which you did not pay tax, but now need to report tax. These sales are claimed in the adjustment's column of your return.Your taxable sales should always equal your gross receipts plus/minus any adjustments.

Local sales tax increases/decreases to take effect on the first day of each calendar quarter. Your business will only be notified of the changes that directly affect your registered business locations. This information will be mailed to the address currently on file with the department. Failure to be notified does not relieve you of the tax.It is important to maintain accurate address information with the Department of Revenue.

Persons selling tangible personal property through vending machines are making retail sales. The sale is deemed to take place at the location of the vending machine. The vendor is responsible for reporting and remitting, directly to the Director of Revenue.

Few States are exempted by the sales tax. For example, Hawaii, New Mexico Delaware and others. New Mexico and Delaware have gross receipt taxes instead while Hawaii has general excise tax instead. So, it is not a good idea to form your business in those states to avoid sales tax and inheriting others. End of the day you may wind up paying additional taxes. Most professional's advice to establish your business in the state you live to keep it simple.

You can be tax exempted in your state if you are reselling the product. For example, you have an auto workshop and in most states it is subject to sales tax. If you bought parts from Auto Zone then you have to provide your tax id to your supplier to avoid paying sales tax. Because instead of your supplier charging sales tax you are required to charge sales tax to your client.

Avoid paying sales tax is a big attraction for most of the internet buyers. Like in this article we have previously discussed that purchases through the internet may be tax exempted if bought from other states but some states are considering it taxable. For example, Tangible personal property purchased via the Internet and delivered to a Georgia address is subject to Georgia's sales and use tax regardless of where the vendor is located. The tax rate is based on the county where delivery takes place.

For example, the State of Tennessee, like other states that impose a sales tax, also taxes the use of property that is brought into the state untaxed when purchased. The purpose of the use tax is not only to raise revenue, but also to protect local merchants, who must collect the sales tax, from unfair competition from out-of-state sellers, who do not collect Tennessee’s sales tax.

If Tennessee's sales tax is added to the price of your purchase, you DO NOT owe use tax. However, if you buy or ship merchandise to your Tennessee address and sales tax is not added to the price, then you are responsible for paying the use tax directly to the Department of Revenue. For example, sales tax is not always added to purchases through:

  • Internet
  • Telephone
  • Mail order catalogs, etc.

Verify the status of all taxes before purchasing a business. Requires a buyer to withhold enough purchase money to cover any unpaid taxes until the former owner produces a receipt from the Tax Commission showing that all taxes have been paid.

If the purchaser fails to withhold the required purchase money and unpaid taxes remain after the business is sold, the purchaser is personally liable for payment of all unpaid taxes.

You cannot be issued a new re-seller permit if you owe any sales taxes due to the department. Because the sales tax is a withholding tax, and you work as an agent between the customer and the tax agency. If you do not pay sales taxes back to the agency then it becomes your personal liability and the tax collection agencies may lien to your personal property.   


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Comments (2)
Daisy Parisi   wrote on : Mon Jan 03rd,2011
I am the newel elected Treasurer to the Calvary Towers Assiciation which is home based in Winter Park, Florida. The purpose of this association is to cultivate and promote friendly relationships and social solidarity among the residents of Calvary Towers, and to promote educational, recreational, cultural activities can lead to enhance lines of communication between the residents. In order to accomplish this we have cake sales, garage sales, breakfasts etc to raise the funds for our social programs, and meet the exppendse to run the programs here at Calvary Towers. We do not make profit from the fund raising. The question to day is can we become sales tax exempt and if so, how do we begin to do this...      View Detail
Reply :
Dear Daisy Parisi: Thanks for choosing for your business needs. You have two choices.

  1. If you are planning to do it for a good cause then you can Incorporate it as a Non-Profit Organization or
  2. You can obtain a Sales Tax Exemption Status.
Should you need any assistance to apply above-mentioned services please do not hesitate to contact us at 516.822.3100

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sl   wrote on : Sat May 07th,2011
Thank you for the urls of some articles. My question remains, however. In the articles above this note, there is conflicting saying on the one hand that internet sales are taxable, and on the other they are not. But, for my purposes, I am not a reseller or initial seller. I am a private person who buys something online for personal use. I have not been taxed by any company that does not have a physical retail location within my state, such as Target, or Sears, etc. BUT I have come upon a company that does not have a retail or any other physical presence in the state of Illinois, where I am, but it wants me, its customer, to pay tax. The company website says its corporate headquarters is in California, but it is actually in Canada. It sells internationally to stores, individuals, and likely other companies. I believe it does have physical locations within some states, but not Illinois. Can it legally charge tax to an individual located in a state in which the company has not physical presence, including no sales representatives?      View Detail
Reply :
Dear SL:

Thanks for choosing for your business needs. We can only share with you the general advice. If you are shipping out any taxable product from the your state then you are required to collect sales tax from your customers and if you are shipping out of state then the buyer is required to pay sales tax to his/her state.

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