What legally constitutes an in-state presence for retailers is loosely defined. Because of this, states continue to be highly aggressive in forcing out-of-state businesses that make sales in their state to collect and report sales tax. This has led to a lot of confusion on tax collection and reporting for retailers.
Today more than ever, businesses need to have a thorough understanding of their nexuses and the laws in each state where they make a sale.
States will generally be able to avoid large penalties if they add language on their receipts to notify about use tax, track customer information on a per-state basis, register to collect sales tax in new states, and regularly mail information reports to state tax departments and customers.
States that require sales tax on sales made by out-of-state retailers to customers in their state include: Alabama, Minnesota, South Dakota, Tennessee, Vermont, and Wyoming. Each has unique provisions and varying thresholds for when sales tax is required.
When a seller does not have a nexus in the state where goods were sold, a use tax is often applied. Use tax rules can be complex, as many buyers are noncompliant with use tax regulations. Because of this, some states have made it mandatory that sales information be reported to state Departments of Revenue and/or Taxation, or buyers. Those states include: Colorado, Kentucky, Louisiana, Oklahoma, South Dakota, and Vermont.
For more information regarding your business’ sales tax obligations, please contact Caroprese & Company.