Do I charge tax on my side business?

[alison-mccammon]

I pay taxes when I buy the product I am selling. I ship anywhere in the u.s. I'm wondering if I need to be charging these customers tax or no tax

[xmasbaby0]

It sounds like you are asking about sales tax.   The laws for sales tax vary from state to state.   You actually need to research this with the states you are shipping to.   We are here to help  with income tax questions, not state sales tax questions.

[rjs]

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. As xmasbaby0 said, this forum is for income tax questions, not sales tax.

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 the 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.

When you purchase product for resale you should not be paying sales tax on it. You have to ask each vendor that you purchase from what they need from you so that they do not charge you sales tax.

[Opus 17]

You should be able to be exempt from sales tax in your home state when you buy products for re-sale, or when you buy materials that are used to make finished products for sale.  You will have to check the state tax department of your state to find out what rules you must follow and if you must register for a sales tax exemption, and then you will contact your vendors to see how you must register with them to be sales tax-exempt.

Regarding selling goods, that is very complicated.  One general rule is that you must have a physical presence in the state where you are selling goods, before that state can require you to collect and pay sales tax.  So you would only need to collect sales tax when selling to customers located in your own state.  However, some states may have different laws, and this is not the right forum to get your answers on sales tax. 

[rjs]

The Supreme Court decision in South Dakota v. Wayfair, Inc., et al. a little over three years ago eliminated the requirement for physical presence in order for the state to require sellers to collect sales tax. Since then, just about all states have passed new laws defining "nexus" for sales tax so that they can require out-of-state sellers to collect sales tax on products shipped into the state. It is usually defined in terms of the number of sales or the dollar amount of sales in the state, but each state has different rules.

The Supreme Court decision is usually referred to as just Wayfair or the Wayfair decision.