I'm starting an online business for handmade items that I make. What are the parameters for collecting sales tax for out of state buyers?

This forum is for income tax questions, not sales tax. To get you started, here is some basic information about collecting sales tax for online sales. You will have to look elsewhere for the details.

Sales tax for online sales is very complicated. Sales tax is charged at the location where the product is delivered, not where the seller is located. Each state has different rules about whether you are required to collect sales tax, and different rates. In many states, the sales tax rate is not the same for the whole state. There are local sales taxes that vary depending on the specific location. A particular item might be taxable in some states and not in others. So you have to answer three questions for each sale.

• Are you required to collect sales tax for the state that the product is shipped to?
• Is the product taxable in the state that it is shipped to?
• What is the sales tax rate at the location that the product is delivered to?

To collect and remit sales tax in a particular state, you are generally required to register with that state. Most states will have an exception to the requirement to collect sales tax for small businesses, based on the amount of the business's total sales, sales in the state, or similar criteria.

There are services or software available to determine the sales tax rate for a specific delivery address. QuickBooks, the small-business accounting software from Intuit, the company that makes TurboTax, includes sales tax calculation and tracking. Go to the following link for more information.

QuickBooks - Calculate sales tax

If you are selling through an online market such as Shopify or Amazon, they will have some mechanism to help you with sales tax.

 

@carriemaxfield , many small businesses forego the collection of Use/Sales tax  from out of state buyers.   In your own state , you know the rate  and  you know where to pay-in the collected taxes.  You are also allowed ( in most states ) to not pay sales taxes on inventory ( not consumables )  that you buy in the state because  this will be part of what you sell to the customer and collect the sale/Use tax on the whole amount.   Most states  ask and expect the  buyer to pay use tax on items bought in another state where no sales/use tax was paid.  That is my view  and I am not an expert on use tax rules in all the states.

 

Good Luck 

pk