- Sales Tax vs. Use Tax: Sales tax is applied to retail sales of tangible goods and certain services, while use tax applies to out-of-state purchases where no sales tax was collected. Consumers may need to report and pay use tax for online purchases from states without sales tax.
- Calculating Sales Tax: To calculate sales tax, identify the base price of the item, determine the applicable state and local tax rates, and use the formula: Sales Tax = Item Price × Total Tax Rate. Resources like state revenue websites and online calculators can assist in this process.
- Compliance and Best Practices: Sellers collect sales tax at the point of sale and must remit it to state agencies. Businesses must register, understand nexus and economic thresholds, and stay updated on tax rate changes to avoid penalties and audit triggers, ensuring proper sales tax management.
Source VAT IT Compliance
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