Sales and use tax compliance can be daunting. Regulations vary by state and jurisdiction making them difficult to navigate, and to make matters even more complex, the rules are ever-changing.
For many people, the concept of sales tax is just a charge you see on your receipt. Expanding your knowledge base to understand the compliance side of sales tax is far from your idea of fun, however, it’s an essential aspect of conducting business.
The following is a basic outline of compliance, Sales and Use Tax 101, if you will, because, let’s face it, ‘You don’t know what you don’t know.’
What Is Sales Tax?
Sales tax is a tax imposed on the sale of goods and services, which is generally calculated as a percentage of the sale price. It is generally collected by the seller at the time of purchase and remitted to the state or local government.
Sales tax is a jurisdictional tax, which means that each state or jurisdiction has its own set of sales tax rates and rules. The amount of sales tax collected is based on the sales tax rate in the jurisdiction where the sale was made, or where the customer is located.
There are four types of Sales Tax: Sellers Privilege, Consumer Levy, Gross Receipts, and Transaction Tax, and each type is imposed differently, whether on the Seller or Purchaser or on the transaction itself.
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