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5 Myths About Sales Taxes

| January 12, 2022, 06:00 PM

Sales Tax Transaction POS

Photo by Kampus Production from Pexels

As a business owner, you know that sales taxes are important in your day-to-day life. You may already be familiar with the basics of state and local sales tax laws, but there is more to it than just understanding what needs to be done. All businesses need sales tax support. This article will explore five different myths about sales taxes and clarify these sometimes confusing topics!

All Sales Taxes are Created Equal

This is the most common myth about sales taxes. People assume all transactions are taxed equally when many factors determine how much tax needs to be paid on any given transaction. Sales tax rates can vary depending on where you live, what type of product or service is being purchased, and whether it’s a luxury item like jewelry or clothing (which tends to attract higher rates) vs. something like groceries which usually attracts lower rates. There may even be special local rules governing certain items; for example, we have no sales tax on hypodermic needles in my city, but they’re subject to sales tax everywhere else!

Online Purchases Are Always Tax-Free

Online purchases don’t get charged state/local sales taxes in some cases. The most common example is when someone buys something from an online retailer that doesn’t have a physical presence in the buyer’s state. For example, if you purchase something from Amazon.com and they don’t have a warehouse or other office located in your state, you won’t be charged sales tax on your purchase. However, there are exceptions to this rule – for example, if you live in California but buy something from an online store based in Texas; you will likely be charged sales tax because Texas has a physical presence in California.

You Have To Pay Sales Tax On All Items You Purchase

This is another common myth about sales taxes. In reality, some items are exempt from sales tax. This can vary from state to state, but common examples of exempt items from sales tax include groceries, prescription medications, and most clothing items.

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Sales Tax Is Only Charged In The State Where The Item Was Purchased

This is another common misunderstanding about sales taxes. Most states have an “origin-based” sales tax system which means the tax is charged based on where the item was purchased, not where the buyer lives. So if you purchase an item in California but live in Arizona, you will be charged California’s sales tax rate on that purchase.

The Vendor Collects And Pays Sales Tax On Behalf Of The Purchaser

This is another common misconception about sales taxes. When someone buys something taxable, they’re supposed to pay sales tax on the item, not the person who sold them the item. So even though a cashier rings up an item and collects payment from you, it technically fulfills both of your obligations (you paying for what you buy and collecting money for it). They don’t owe any sales taxes on that transaction because they’re just acting as a go-between between yourself and the state. There is one exception to this rule – if something is being bartered instead of bought/sold with actual currency, then that’s when things can get tricky!

As the digital age progresses, more and more companies are outsourcing their sales tax services. Aside from freeing up your time to focus on other important tasks for your business, you also ensure that all of your company’s taxes are accounted for legally with an outside source handling these needs. Outsourcing ensures compliance with state and federal tax laws while saving time and money in the long run by hiring a reputable outsourced service provider who is knowledgeable about what they do best.

 

Category: Local News, NEWS

About the Author - Stephanie Maris

Stefanie is a local blogger and social media content marketer from Maryland and most recently a wife and a mother. She has an unhealthy obsession with puns, sarcasm and caffeinated beverages.

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