What Is Sales Tax?

By definition, “sales tax” is the state or local-level tax on the retail sales of tangible personal property and/or services.  It can commonly be referred to as the tax on a sale at retail.  When you enter a store to make a purchase, you may notice the line item that says “tax” on your receipt; this is sales tax.

 

  • sales tax – state or local-level tax on the retail sales of tangible personal property and/or services

 

Since sales tax is a state or local-level tax, each state creates there own regulations and statutes with regards to what is deemed to be taxable tangible personal property and services.  Keep in mind that every state is different when it comes to sales tax regulations and statutes and one state’s regulations cannot be applied to every state.  Currently, there are only 45 states which impose a sales tax.  New Hampshire, Oregon, Montana, Alaska, and Delaware do not have a sales tax.

One other area to point out is the definition of sales tax is not only a state tax but a local tax as well.  Within each state, local jurisdictions (counties, cities, parishes, etc.) may have the authority to impose a local sales tax rate on taxable tangible personal property and services.  With some states, the local tax rate is built right in with the general sales tax rate and remitted to the state.  Other states have separate local rates depending on each locality, but the local rate is still remitted to the State.  Finally, some states have home-ruled local jurisdictions.  Home-ruled local jurisdictions means that each home-ruled locality sets the rates and collects the sales tax.  The home-ruled local jurisdictions may also have separate regulations on the taxability of tangible personal property and services.  This means items deemed to be non-taxable at the state-level may still be taxable at the local level depending on the home-ruled jurisdictions laws.  Again, every state is different with how local jurisdictions impose a local rate of sales tax.  Some states do not have local rates at all – only a state rate.

At TaxMatrix, we are familiar with individual state sales tax laws and are ready to help you with your sales tax returns and filing. If you have questions, please reach out to our Tax Help DeskSM and find your answers today.

 

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