Sales tax in the United States is one of those administrative hassles that every product seller deals with. Because sales tax is governed at the state level, and because each individual business’s sales tax liability is different, there are very few hard and fast rules of sales tax.
The following ten sales tax facts will school you on sales tax basics, and ensure you don’t make a costly mistake.
1. There’s no overarching “IRS” for sales tax
In the U.S., the Internal Revenue Service handles all income tax administration. But there’s no such service for sales tax.
Instead, each U.S. state has a taxing authority that handles sales tax. These authorities are usually called the “[State] Department of Revenue,” but they may go by other names. For example, California’s taxing authority is the California Board of Equalization and Texas’s is the Texas Comptroller.
If you have a question or need information about sales tax, don’t check with the IRS —contact your state’s taxing authority.
2. State sales tax due dates vary by state
Since each state makes their own sales tax rules and laws, they also set their own due dates. In most states, the sales tax due date is the 20th of the month after the taxable period.
Ben files Georgia sales tax every quarter. Georgia Q1 runs from January 1-March 31st. Since Georgia’s sales tax filing due date is the 20th of the month after the taxable period, Ben’s Georgia sales tax filing is due on April 20th.
Other states, though, have other sales tax filing due dates:
- Maine’s sales tax filings are due on the 15th of the month after the taxable period
- Ohio’s are on the 23rd
- California’s are on the last day of the month.
Your state will assign you sales tax filing due dates when you register for your sales tax permit.
3. Taxable items vary from state to state
For the most part, items of tangible personal property (like toothbrushes and coffee cups) are taxable.
However, some states don’t consider necessities like food and clothing to be taxable. Other states might not consider things like medicines or textbooks to be taxable. Still other states confuse the issue.
While most clothing is entirely tax exempt in Pennsylvania, clothing items priced at $175 or under are non-taxable in Massachusetts. And if an item of clothing is priced at more than $175 then only the portion of the price above $175 is taxable. Talk about confusing!
If you are unsure whether your products are taxable, check with your state’s taxing authority.
4. Some states only have one sales tax rate
Not only do sales tax rules vary, sales tax rates vary, too.
The statewide sales tax rate in Connecticut is 6.35%. Since Connecticut only has one sales tax rate, anytime you make a purchase in Connecticut you’ll pay the 6.35% sales tax.
The other states that only have a single sales tax rate are:
- Rhode Island
The nation’s capital, Washington D.C., which is technically a district, also only has a single sales tax rate.