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In some states, there is no sales tax. What are the rules if you purchase something online from a company that is located in one of these states? Do you pay the sales tax of your state?

Sales Tax
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Christopher Royer
Sales & use tax is another avenue states collect revenue outside of income taxes. Most individuals are familiar with sales tax and not use tax. In general, everyone who uses a product is supposed to pay tax as the end user in the state they use the product (use tax). Since it would be difficult for states to track every individuals spending, they impose a sales tax on the seller who essentially passes the cost onto the consumer. There is a set criteria (known as nexus) that requires companies to collect and remit sales tax. If the company's set of facts do not meet the nexus rules for a particular state, that state can not require the company to collect and remit the tax.

The internet has created some controversy with respect to the nexus rules. What often occurs is an individual purchases a product from a company who is not required to collect sales tax for that individuals state. Since the tax is applied to the end user (in this case the individual), the individual is required to report and include the use tax for his state on his individual income tax return.
Leave a Comment 466 weeks ago

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Michael Fleming
Very nice answer Christopher.
Reply 454 weeks ago

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