I have a online business in Oregon (no sales tax) . A customer in IL asked me about collecting sales tax since her state has a sales tax. I was told that there is a loophole basically and since my business is in OR and all parts of it, then I do not have to deal with any sales tax. Can someone clarify what I need to do? Do i need to collect taxes for another state? The purchase is for $600 so if means anything.
USA Online selling and sales tax
- Thread starter shawna
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AGH the CPA
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what you have to consider is a concept called nexus. If your work is in Oregon and you are solely shipping to IL, then you do NOT have a business in IL and do not have to collect sales tax. The END user typically DOES need to report the purchase and pay whats called a USE tax on items bought from out of state (actually, in most states you are supposed to do this regardless) If on the other hand, you had a salesman or a warehouse in IL, that might be considered sufficient to create nexus (or a physical presence) and you would therefore have to collect and remit sales tax.
Thank you for the reply. I thought that was the case but just thought it could not hurt to ask again. I really appreciate your help.
If you regularly have sales in a particular state even though you have no physical presence, you have nexus. So in the example given, you exist and create in OR, but only sell to IL, you have nexus in IL.
Use tax in many states in only applied to purchases for business use.