Hawaii's general excise tax (i.e. sales tax) is a business privilege tax that is imposed on the gross receipts of virtually any economic activity carried on in the state. Whereas most states impose a sales tax on the sale of tangible personal property and only certain enumerated services, Hawaii’s general excise tax is imposed on all sales (absent a few exceptions such as sales to nonprofit organizations).
Georgia is another fairly straightforward state from a sales and use tax perspective. Sales and use taxes apply to the sale of tangible personal property and some enumerated services. While there are local (county level and the city of Atlanta) taxes imposed throughout the state of Georgia, these taxes are administered at the state level.
For sales and use tax purposes, the District of Columbia should be treated as a state. The general sales and use tax rate is 5.75%.
In comparison to other states, DC is a fairly easy state in which to comply with sales and use tax laws. There aren’t any local rates to deal with and rules are similar to those of other states – sales and use tax applies to tangible personal property and certain services.
Generally, sales of tangible personal property and services are NOT subject to a sales or use tax in Delaware.
I frequently talk with companies who sell to end-user/consumers who have told me that they don’t have any sales and use tax risk because they pay sales tax to their vendors – while they failed to charge sales tax to their customers. They are comforted by the fact that “the state got their tax revenue and therefore shouldn’t come knocking for more”. When I tell them that they still have a sales or use tax liability, they are surprised. When I tell them they may not get ANY credit for the tax they paid to their vendors, they get irate – “What do you mean I still owe the tax – that’s double taxation!”
If you’ve been following the EYE ON series, Connecticut is the first state (in alphabetical order) that has state level sales and use taxes only. The general sales and use tax rate is 6.35%. While sales tax compliance is fairly straightforward in Connecticut, there are a few exceptions.
Colorado has the lowest state sales tax rate in the country at 2.9% (except for the 5 states that don’t impose any sales tax). But don’t get too excited since there are a number of local jurisdictions within Colorado that impose sales taxes – taking the average total sales tax rate to about 7.5%.
Like most states, California imposes a sales tax on the sale of tangible personal property – but relatively few enumerated services. As you might expect, California is rather attractive for software companies; electronic downloads of software and cloud computing are not taxable in California.
Arkansas is a fairly straightforward state from a sales and use tax perspective. Sales and use taxes apply to the sale of tangible personal property and some enumerated services. Unlike Alaska, Alabama and Arizona, all Arkansas local sales and use taxes are administered by the state. That means, there is a single sales and use tax return filed for all state and local sales and use taxes – rather than having to file a separate return for each local jurisdiction.
Arizona doesn’t have a traditional “sales tax” – instead, Arizona imposes a transactions privilege tax (“TPT”) on the sale of tangible personal property and certain services. However, the TPT is the equivalent of a sales tax in almost all respects.
Alaska is one of five states (Delaware, New Hampshire, Montana, and Oregon) that do not impose a traditional sales or use tax. Since there isn’t a state level sales or use tax, you might conclude that you don’t need to worry about sales or use taxes when doing business in Alaska. However, like Alabama, there are numerous local or “home rule” jurisdictions within Alaska where sales and use tax is imposed (see our Eye On Alabama Sales Tax for a definition of “home rule”). Local jurisdictional sales tax rates range from 0.5% to 7.5%.
Alabama is what we in the sales tax business call a “home rule” state - otherwise known as a pain in the neck. “Home rule” refers to a state which has locally administered sales and use taxes – meaning you typically can’t just file a single state return to report all the sales or use tax for the month. However, Alabama is unique – there are potentially four different filing options available to taxpayers as follows:
Registering for a state sales tax ID used to be a fairly routine process and still is in some states. However, over the past decade with the ever evolving electronic administration of sales and use tax, just registering for a state sales tax ID has become a technical and interpretational challenge. In some cases, the states have attempted to include every tax type in a single registration form – creating a labyrinth of questions and information requirements. Oftentimes, a business will try to register themselves, only to get partially through the process before realizing that they really need someone with experience to assist in the registration process.
In recent weeks I’ve talked with at least three companies who sell to end-users/consumers who have told me that they don’t have any sales and use tax risk because they pay sales tax to their vendors – while they failed to charge sales tax to their customers. They are comforted by the fact that “the state got their tax revenue and therefore shouldn’t come knocking for more”. When I tell them that they still have a sales or use tax liability, they are surprised. When I tell them they may not get ANY credit for the tax they paid to their vendors, they get irate – “What do you mean I still owe the tax – that’s double taxation!”
Sales tax is imposed on the sale at retail of tangible personal property. Therefore, sales tax generally doesn’t apply to wholesale transactions – as long as the appropriate exemption/resale documentation is executed. When a reseller fails to provide the appropriate exemption documents to its vendor, the vendor is required to charge sales tax to the reseller. Subsequently, when that reseller sells to the end-user/consumer, there is a sales tax due on that retail sales price.
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The United States has possibly the world’s most complex sales tax regime. This is due to each state...
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