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Sales Tax when Selling Online
Selling online is when sales tax starts to get tricky. If you only have nexus in your home state, you are only required to collect sales tax from buyers in your home state, even when selling to people all over the country online.
Though, unlike with in-person sales, the sales tax rate you charge your customers will likely vary when you are selling online. A handful of states are what is known as “origin-based” sales tax states, where you charge every customer in the state the sales tax rate at your business location. But most states are “destination-based” sales tax states, meaning you are required to charge your buyer sales tax at the sales tax rate at their ship to address.
For example, say you live in Stamford , NY but make a sale to a buyer in Buffalo, NY. Since New York, like most states, is a “destination-based” state, then you’d be required to charge your buyer the sales tax rate at their Buffalo ship to address.
Sales Tax on Shipping
When selling online, you also need to take sales tax on shipping into account. About half the states consider any shipping charges you charge your customer to be a taxable part of the sale. The other half say that shipping is non-taxable as long as you separately state the shipping charges on your invoice.
Here’s an example:
You sell a $100 necklace to and charge $5 in shipping to a customer in a state where shipping is taxable. In this case, you’d charge sales tax on the $105 total of the item cost + the shipping charge.
But you well the same $100 necklace and charge $5 in shipping to a customer in a state where shipping is NOT taxable. In this case, you would only be required to charge sales tax on the $100 price of the item.
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