What Is the Sales Tax by State?

Sales tax by state amounts differ by each state. There are a couple of states that do not charge any sales taxes. Some states only charge sales tax on non-consumable items, while some states charge sales taxes on all purchases. There are also some states that charge a higher sales tax rate for purchases made at a restaurant.

In this article you will find the definition of a sales tax, what it is used for, and ways you can make the sales tax work for you. You’ll also learn what the sales tax rate is for each state, allowing you to be informed.

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What Is the Sales Tax by State?

A sales tax is money that must be paid to the government for the sale of products or the use of services. The tax amount is generally paid at the time of purchase to the seller. The seller will then pay the tax to the taxing authority. While state laws vary, a business will pay taxes on any sales made in a state that contains an employee, building, or affiliate.

There is currently a controversy regarding sales taxes on online purchases. These purchases are not made through a building, employee, or affiliate. While laws regarding these purchases have not been made at the federal level, some states have started taxing online purchases. Be sure to consult with a tax expert if you are unsure of your state’s current sales tax laws.

Who Uses the Sales Tax?

Most of the sales tax revenues will go to a general fund that is operated by the state. These revenues are then added to funds that the state collect from licensing fees, income taxes, or other forms of revenue. In most states, the money from the sales tax goes to pay for educational expenses, road repairs, and state health programs. If the state is agreeing to contracts with companies in order to enticing them to relocate to their state, the general fund may also help pay for those agreements.

The sales tax benefits states by allowing them to provide services they would not otherwise be able to afford. Without the sales tax, states would not be able to budget for educational programs. They would most likely also have to cut salaries for state employees. Correctional institutions would struggle as well and may require closure in order to cut expenses.

How Sales Taxes Effectively Work for Your Business?

By and large, the sales tax benefits businesses by providing a source of income for the state that allows other taxes to remain lower. If the state is unable to collect taxes from sales taxes, they would need to find money from other revenue streams. These could include raised income taxes, or raised fees for business licenses and registrations. Property taxes for businesses may rise as well. Failure to obtain these funds would result in an unbalanced budget for the state.

Businesses also benefit from sales taxes as a result of services provided by the state. If roads are not maintained or schools are shut down from lack of funding, their customer base will leave the area. Customers may also leave the area if their property taxes or income taxes are raised to an excessive level. The funding of public services helps keep schools open, provides jobs, and makes the area a more desirable place for your customers to live.

5 Tips Regarding the Sales Tax by State

  • Know your sales tax by state rate. As of 2017, the states that pay no sales tax are Alaska, Delaware, Montana, New Hampshire, and Oregon. Below are sales tax rates for other states, including local taxes. These rates will change, so always verify current rates:
    • Alabama: 8.91%
    • Arizona: 8.17%
    • Arkansas: 9.26%
    • California: 8.44%
    • Colorado: 7.44%
    • Connecticut: 6.35%
    • D.C.: 5.75%
    • Florida: 6.65%
    • Georgia: 6.96%
    • Hawaii: 4.35%
    • Idaho: 6.01%
    • Illinois: 8.19%
    • Indiana, Missisippi, New Jersey, and Rhode Island: 7%
    • Iowa: 6.78%
    • Kansas: 8.20%
    • Kentucky: 6%
    • Louisiana: 8.91%
    • Maine: 5.5%
    • Maryland: 6%
    • Massachusetts: 6.25%
    • Michigan: 6%
    • Minnesota: 7.2%
    • Missouri: 7.81%
    • Nebraska: 6.80%
    • Nevada: 7.94%
    • New Mexico: 7.35%
    • New York: 8.48%
    • North Carolina: 6.9%
    • North Dakota: 6.56%
    • Ohio: 7.1%
    • Oklahoma: 8.77%
    • Pennsylvania: 6.34%
    • South Carolina: 7.13%
    • South Dakota: 6.56%
    • Tennessee: 9.45%
    • Texas: 8.05%
    • Utah: 6.68%
    • Vermont: 6.14%
    • Virginia: 5.63%
    • Washington: 8.89%
    • West Virginia: 6.07%
    • Wisconsin: 5.43%
    • Wyoming: 5.47%
  • Pay your sales tax every year. As a general rule, paying taxes is not a popular task. However, failure to pay the proper sales by state to your state can result in fees and even criminal charges.
  • Learn your state’s exemptions. You may be exempt from some of your state’s taxes, so consult a qualified tax attorney to make sure you are paying the proper amount.
  • Collect the proper amount from customers. You are responsible for paying the correct sales tax to the state even if your customers didn’t pay it to you. Charge the customer the sales tax. Record-keeping is a chore, but it is a cost of business.
  • Hire a qualified tax attorney. Proper recording and payment of taxes is not a task for the faint of heart. Find a qualified tax lawyer or accountant who can take this load away from you.

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Summing Up

Do you have experience handling unique sales tax by state situations? If you have experience as a business owner with sales taxes, we would like to hear from you. Share your knowledge of the current sales tax by state and learn from others as well. We welcome you to share via Facebook or in the comments section.

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