There are five states without sales tax: Alaska, Oregon, Montana, Delaware, and New Hampshire. Does this mean that you can relax about collecting sales tax if you have nexus in these states?
First, there can be local sales taxes. Alaska, for example, has no state sales tax but cities and counties in Alaska can levy sales tax. Some cities have sales taxes as high as 7%, and sometimes those taxes vary depending on the time of year. There are more than 100 different sales tax jurisdictions in Alaska. If you do business in our northernmost state, you definitely cannot just relax about it.
Responsibilities for non-tax states
What about business owners living and working in those tax-free states? Since the Supreme Court’s Wayfair decision, businesses must collect and remit sales tax in every state where they have nexus according to the state’s definitions. While it used to be the case that a company had to have a physical presence in the state to establish nexus for sales tax, now a state can require sales tax compliance based on economic nexus, “cookie” nexus, and other more flexible definitions of nexus.
This means that companies based in sales tax-free states but doing business in states that have sales tax have the same responsibilities as those in states with a state sales tax. New Hampshire strongly objected to this. Their businesspeople, they said, were not accustomed to sales tax. They didn’t have systems in place for it and they didn’t have software or skills to handle sales tax calculations and filing. The new requirements under the Wayfair decision presented obstacles to businesses headquartered in New Hampshire.
While New Hampshire’s legislators try to change the situation, businesses in New Hampshire have to follow the same rules as those in other states. This is true for all the states which do not have state sales tax.
For most nationwide businesses, it makes sense to register for sales tax compliance in all 50 states. The economic nexus for remote sellers is based on thresholds of sales or revenue. For example, many states require sales tax compliance when a company sells $100,000 worth of goods in the state within a year. Because thresholds are different in different states, you must determine for each state whether your company has reached that threshold or not. You will then be responsible for collecting and remitting sales tax for the year when you reach that threshold, or for the following year, depending on the state.
Sales Tax DataLINK can determine which states your company has nexus for and register your company in all the states where you need to register. We can also handle sales tax calculations and file for your company. You may prefer to use our patented sales tax software in-house, or you can outsource all your sales tax compliance needs to our team of experts.
Call 479-715-4275 to schedule a demo of our sales tax software solution. We will use your own data so you can really see how easy it is to use Sales Tax DataLINK.