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    1. Carol_111 is offline

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      #1

      Collecting sales tax as a home based business

      I have a little cottage industry going out of my home with essential oils, soaps, knit hats, serious hippie stuff. Before the tax season comes up, I need to know whether or not, I have to charge sales tax on the products I sell out of my home.
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    2. CWayCross is offline

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      #2
      Short answer - Yes. If you’re doing business with people inside your state, then you must register with your state to collect tax, charge the applicable tax to your customers, and remit the said tax to the state. As far as I can tell, your products are in fact, taxed by the 45 sales-tax states.

      That said, if you sell outside the state where you have a physical presence, then you don’t have to pay tax to that state. So long as you lack nexus with that state, you’re in the clear, since you’ll count as a mail-order or Internet business, and any tax is the responsibility of your customer (which is actually use tax, rather than sales tax).

      When you have a sufficient permanent or temporary presence in the said state nexus or a bond is established between you and that state. That is, if you have warehouses or employees present in the state. States vary on what length of time is needed to establish nexus-- from one day to several-- so you’ll want to check with the state’s tax authority to find out exactly how long a visit is required to establish nexus. It seems like nitpicking, but it is entirely possible to establish nexus by simply visiting a state.

      Keep in mind, this is extremely streamlined and simplified, and actual tax law is several orders of magnitude, more complicated. Just check with the state in question to make sure you’re sufficiently covered. You don’t want to find yourself in the wrong come audit time.
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    3. Carol_111 is offline

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      #3
      I was afraid it was going to be something convoluted like that. Next question-- how do I know what rate of tax to charge?

    4. mammomind is offline

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      #4
      Tax law is definitely a little complicated. The tax rate you’ll be charging is determined by the jurisdiction in which your customer makes the order. This will possibly vary not just state to state, but county to county. For example, Alabama’s statewide sales tax is 4.0%, but Madison County Alabama charges 8% on most products.

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