Sales and Use Tax Identification Numbers
What is a Sales and Use Tax ID?
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Table of ContentsWhat are Sales Tax Licenses and Numbers?What is Sales Tax?What are Sales Tax Numbers?Who Issues a Sales Tax Number? Who Pays Sales Taxes? What is Use Tax?How are Sale Taxes Paid by the Business? It must be remitted to the State on a monthly basis, with a few exceptions for certain types of businesses.
What are Sales Tax Licenses and Numbers?
A state-issued license and identification number for businesses collecting sales tax. If you sell certain types of goods, your state likely requires that you collect sales tax from the purchasing customer.
A business must generally collect sales tax on any tangible item sold. Rental of consumer goods, storage, use of personal property, and certain services may also be covered.
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What is Sales Tax?
Sales tax is an amount of state tax paid by the consumer when purchasing a good in a particular state. Any business that sells tangible goods must have a sales tax number before making sales to customers.
Note: Some states require the collection of sales tax on other activities, such as rental activity. Research you own states requirements for sales tax withholdings and numbers.
What are Sales Tax Numbers?
If you sell a product, your state will require a sales tax number. This is because all sellers of products are required to collect sales tax on the item from the individual purchasing the item. This is true even if your state does not collect or charge sales tax on goods sold.
The sales tax number is part of the system used by the state to track sellers of goods (merchants). It allows merchants to report and deposit the sales taxes withheld to the state each month.
Who Issues a Sales Tax Number?
The States Department of Revenue generally issues the numbers along with instructions for collection of tax and remittance to the treasury.
The state treasury department generally regulates the charging and collection of sales tax.
Who Pays Sales Taxes?
Sales taxes must be paid by the customer and not the business.
What is Use Tax?
Use tax is a tax on goods that are purchased in another state (at a tax free or lower tax rate) and used, consumed, stored, etc. (but not for resale) in the taxing state.
The amount of the Use Tax is normally the same as the state sales tax (or the difference between the state's sales tax where consumed and the state sales tax where purchased).
When the good is purchased in another state with a lower sales tax, the state of use charges a use tax equal to the difference between the sales tax in the state of use and the sales tax in the state of purchase.
The purpose of the use tax is to disincentivize buying goods in another state, simply because there is lower applicable sales tax.