What Transactions are Subjected to Sales Tax?
There are several types of transitions that are subjected to the general sales tax. However, each tax jurisdiction makes specific and unique determinations as to the manner in which sales taxes are imposed. The regular sales tax is applied to purchases, as a percentage of the cost of an item. Merchandise purchases online may not be subjected to a sales tax at the point of purchase, if the company does not have a physical presence in the state where the item is being shipped.
However, the consumer is still required to pay the tax directly to their state. That tax burden however, only applies if the type of merchandise is normally taxed in that state. Each state taxes differing merchandise and imposes taxes at a different percentage of the sale price. In addition to the state sales tax, there are local sales taxes imposed in certain circumstances. Each local state tax must adhere to state and Federal tax restrictions.
Regular Sales:
Sales taxes apply to the purchase of many goods and services. However, each tax jurisdiction makes specific and unique determinations at to tax rates and merchandise that is subject to a sales tax. For example, some states do not impose a tax on provided services, while others do.
The regular sales tax sometimes applies to merchandise such as electronics, clothing and food. However, each tax jurisdiction can decide to exempt certain purchases from the tax. For example, some states do not tax food considered necessary, such as bread and milk. Yet, those states may tax food items considered a luxury, such as candy and prepared foods. Although each state makes those determinations, local governments may also add a separate sales tax to merchandise and services.
Internet Sales:
Consumers that make purchases online, may or may not be subject to an immediate sales tax on their purchase. Some companies that conduct business online, charge a state sales tax, including on shipping and handling,while others do not. The factors that determine if a company charges a sales tax will depend on where the company is located, and whether it has locations in other states. For example, a department store, which has stores and warehouses in many states, would likely charge a sales tax on purchases delivered to every state.
Whereas a small business, which perhaps has only one location, would only charge a sales tax to shipments within the state where they are located. In purchases where there is no immediate sale tax, the consumer is expected to make a tax payment directly to their state, and local government, if the taxes would normally apply to the purchase. For example, if a consumer purchases clothes online, and their state does not impose a sales tax, they are not required to pay a sales tax on those items purchased online. However, if their state does impose a sales tax on clothing, they are required to remit payment to their state. While out of state purchases incur a use tax, that tax is still considered a sales tax.
State Variations:
Each state has variations in the way that they impose sales taxes. In most cases, each state will impose a sales tax directly to the consumer at the pint of purchase. In other words, when a consumer purchases items in which the state imposes a sales tax, the consumer will pay that sales tax when the purchase is made.
Sales taxes are currently imposed as a percentage of the sales price of merchandise, and services in some jurisdictions. Yet, some states do not impose a sales tax which is paid directly by the consumer. Some states, such as Hawaii, impose a sales tax which is paid by businesses, as a percentage of income from sales in a tax year. That business likely passes that tax on to the consumer through adding to the base price of an item. In both direct sales taxes, and other types of taxes, the price of that tax generally gets passed onto the consumer.
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