Sales Tax Questions » Sales Tax Nexus

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Question: Do we charge people (from out of state) sales tax? Do we charge them our rate, their state rate - or nothing at all? We are in MA - but also have customers from NH and NJ.

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Response: The determination as to whether you are required to collect sales tax on sales that you ship into other states depends on whether you have established nexus in the state of delivery and then whether the products or services you sell are subject to sales tax in that state. If you are based in Massachusetts and sell to customers located throughout Massachusetts, you will be required to collect Massachusetts sales tax on all taxable sales regardless of whether the customer comes to your location or you ship the goods to them.

If you sell to customers that are located in New Hampshire and you ship the goods to them, you are not required to charge them tax as New Hampshire does not impose a general sales tax. If however, they come to your location and pick up the goods in Massachusetts, then you are required to collect Massachusetts tax on the taxable goods or services you sell.

If you sell goods to customers in other states that impose a general sales tax like New Jersey, then you have to determine whether you have established nexus in that state. Generally, nexus is established through a substantial physical presence in the state either through people or property on either a permanent or temporary basis and can include activities performed by agents operating on your behalf. What establishes nexus does vary by state and your activities in the state. If you are deemed to have nexus in the state to which you are shipping taxable goods or performing taxable services, then you are required to collect that state?s tax on all taxable transactions into that state.

You should not collect Massachusetts tax on sales that are not delivered in Massachusetts.

We would be happy to help you determine where you have nexus

Diane L. Yetter
President
YETTER-tax meets technology
Sales Tax Institute
(312) 701-1800

Sales Tax Questions answered by Diane Yetter.

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