In our last post, we stated that it all starts with nexus. Nexus is the term that is used to describe the link or connection with a state before a state could require you to collect or pay its taxes.
If you have nexus and your sales into the state are material, then we suggest you consider getting registered to collect and remit sales and/or use taxes. However, don’t jump too quickly. If you have past exposure, you may want to explore a mitigation option such as an amnesty or voluntary disclosure agreement (VDA). We will discuss these in an upcoming post, but if you have questions or need assistance in the meantime, please reach out.
We will be start addressing actual nexus creating activities in our next post, but today we thought we would start out with a lighter subject and discuss those states that are generally thought of as not having a sales tax.
No State Level Sales Tax
There are five states that are generally thought of as NOT having a sales or use tax. They are Alaska, Delaware, Montana, New Hampshire and Oregon. However, this is not entirely true, which is why we say a state level sales tax. See below for details.
Alaska- Alaska does not have a state level sales tax but they do have borough and municipal sales taxes. There are over 100 jurisdictions in Alaska that have some sort of sales and/or use tax. For most companies this may not be an issue as they do not have any activities in Alaska that create nexus, but if you do and your sales are material, these jurisdictions should not be overlooked. Contact us directly if you have additional questions.
Delaware - Delaware does not have a sales tax but they do have a use tax on the lease of TPP. The tax is required to be paid by the lessee but collected by the lessor. This tax is easily overlooked and many companies do so. If you are the lessor of TPP in Delaware and the dollar amounts are materially you should contact us directly for more information.
Montana - Montana does not have any state or local sales or use taxes.
New Hampshire - New Hampshire does not have any state or local sales or use taxes.
Oregon - Oregon does not have any state or local sales or use taxes.
So we start this month off with some relatively good news. Most sellers don’t have to collect sales tax in these five states. If you have questions about Alaska or Delaware,let's talk.
Coming up - In our next post, we will begin exploring nexus creating activities by examining the impact of having inventory in a state.
Other recent “Sales Tax Basics” posts by Michael J. Fleming:
- Are Amazon FBA Sellers Responsible for Collecting Their Own Tax?
- Amazon FBA Tax: New Amnesty Can Protect Delinquent Sellers
- Additional Amazon FBA Tax Amnesty Information
- Sales Tax Filing Basics
- Taxability: Sales Tax HotSpot #2