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How do you charge sales tax when selling items online?

A:

Quick Answer

Online stores that do not have a physical presence in a state are not required to charge sales tax according to the Small Business Administration (SBA). States that do not have a sales tax areAlaska, Delaware, Hawaii, Montana, New Hampshire and Oregon.

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Full Answer

Businesses that have a physical storefront and sell online are required to charge sales tax for the items sold over the Internet by law, as stated by the SBA.

A physical presence, or "nexus" is defined differently by each state. Physical presence can mean store, office or warehouse. If the seller performs home-based sales as well as sells online, then the business has a nexus in the state. In some circumstances, a state may define a home office as a physical presence, according to the SBA.

Some states offer tax exemptions on some items such as food and clothing.

Some e-commerce software application services, known as "shopping carts,"can be programmed to calculate sales transactions andautomatically figure in local and state sales tax.

An exception to charging a sales tax online is if the buyer and seller are located in the same state. In that case, local and state sales taxes apply. Sellers should check with their local state revenue service to be sure they are complying with the law, suggests the SBA.

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