A Guide to Navigating Sales and Use Tax Rules by StateOctober 29, 2015
Heading to a craft show or fair to sell goods? Be mindful of your sales and use tax obligations in the state you are selling.
Do you sell your goods out of state at craft shows, flea markets, fairs, etc.? Are you following the appropriate sales and use tax requirements? There are some unique considerations for selling your products at events out of your home state—don’t get caught by surprise! 45 U.S. states impose sales and use tax, so for the majority of vendors, knowledge of your sales and use tax obligations is important.
Sales tax tips for selling goods out of state
If you are selling your goods at fairs or shows, knowledge of your sales tax obligation is crucial. Summer and fall are popular times for craft shows and fairs, and if you’re headed to one as a vendor, you will likely face sales tax requirements. Here are some steps you can take to be sales tax compliant:
- As an out of state vendor of a taxable business, you need to apply for an Employer Identification Number (EIN), also known as a Federal Tax Identification Number. For many states, there is an online application.
- Once you acquire an EIN, you may have to register with the state you are selling your goods in.
- It does not matter where your main business is located-you have to follow the rates and procedures of the state you are selling your goods in.
- In order to collect sales tax, you might need a permit on the local level (different rules per state).
Are any items exempt from sales tax?
There are certain items that will not be subject to sales tax. Check each state department’s site for specific state information.
What about use tax?
The use tax is imposed on consumers who reside in states that impose a sales tax, but purchase items in states without sales tax. So even if a product is tax free in the state it was purchased in there is still a use tax owed in the consumer’s home state.
Though this tax is ignored by many taxpayers, there are possible penalties and interest due for those that do not pay what they owe. The use tax rate is the same as the sales tax rate in the taxpayer’s local residence. The purpose of this tax is to protect in-state sellers against the unfair advantage from out-of-state retailers that do not have to collect sales tax.
Which states do not impose sales and use tax?
As mentioned above, 45 states impose a sales and use tax, so what are the five remaining states that do not?
- New Hampshire
Since the rules vary depending on the state you’re selling in, be sure to read up on the specific requirements both for where you are headed to sell your goods and the location of your home business. Generally, a retailer is not obligated to charge and collect other states’ sales taxes unless the retailer has nexus (physical presence of property and/or employees or agents) in the other state(s). You want to be sure you are selling goods legally, so consult your tax advisor for further guidance.
Visit BusinessUSA’s State Resources Portal for more information on your state and states you sell your goods in.
Questions? Contact any member of our Tax Services Team.