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For filing sales taxes, if your company is in an origin

for filing sales taxes, if your...
for filing sales taxes,
if your company is in an origin based state, and you sell online to a customer who is out of state, then you charge him sales tax based on your state and file to your state?and what if your company is in a destination based state, again selling online to a customer who is out of state? you hold tax based on your customer's state and file and pay sales tax to his or your state?assume no presence in customer's state in both cases
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Answered in 4 hours by:
10/13/2017
bkb1956
bkb1956, Enrolled Agent/Real Estate & Corporate Paralegal
Category: Capital Gains and Losses
Satisfied Customers: 4,054
Experience: 20+ years of experience as a tax preparer; 30+ years of experience as a real estate and corporate paralegal
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Hello again.

If your company is located in an origin based state and you sell online to a customer who is out of state and you have no physical presence in that other state, you do NOT charge sales tax.

If your company is located in a destination based state and you sell online to a customer who is out of state and you have no physical presence in that other state, you charge sales tax based on the customer's sales tax rate and file and pay the sales tax to that other state.

See the following: https://blog.taxjar.com/charging-sales-tax-rates/

Please let me know if I can assist you further.

Thank you and best regards,

Barb

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Customer reply replied 1 month ago
Hi Barbara,
Thanks for the help yesterday and now. But I was actually seeking a second opinion on this, I know what you already told me. Just want second opinion.. In the link you provided it doesn't say anything about where you file either. And there is also conflicting info because he first says for a destination based state you charge sales tax based on your customer, but then he also says you do not collect tax if you dont have nexus there. I wanted a second opinion on this from someone else too.
Customer reply replied 1 month ago
anyway i will rate you, but please also answer my question i just asked in the follow up then.... and then i will rate you and will ask it again with different wording because system doesn't let me ask same question again.

Thanks for letting me know that you really wanted a second opinion. Don't worry about rating my answer here. I will opt out so another expert can assist you, and you don't have to post another question.

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Lane
Lane, JD, CFP, MBA, CRPS
Category: Capital Gains and Losses
Satisfied Customers: 12,875
Experience: Have been providing Financial and Tax advice for 30 years.Concentration in Corporations, Estate, Income Tax and Business Planning
Verified

HI, MY NAME’S LANE - I hold a law degree (J.D.), with concentration in Tax Law, Estate law & Corporate law, an MBA in finance, a BBA, and CFP & CRPS (Chartered Retirement Plans Specialist) designations, as well - I’ve been providing financial, Social Security/Medicare, estate, corporate, non-profit, and tax advice 1986.

...

You never charge sales taxes in a state where you have no nexus (no physical presence).

...

States with origin-based laws tax customers based on the location of the business as opposed to that of the consumer. For example, if the company is located in a state with a 5% sales tax rate, all customers are taxed at a rate of 5% no matter where in the country they are located.

...,

In destination-based states, businesses charge sales tax based on the location to which goods are being sent

...

But overarching above ALL of that is whether you have nexus in a state. Where this becomes important is when you have regional offices, branch offices, or warehouses or employees in more than one state. AND complicating that can be the states where sales taxed change based on municipalities such as counties and cities.

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As an example, generally, if you are located in an origin-based state and make sales to customers within that state, you would charge sales tax based on your location, including any local and state taxes. For example, if you are based in Salt Lake City, Utah, and you make a sale to a customer in Provo, Utah, you will charge the applicable Salt Lake City sales tax on the sale.

...

In the case of California, if you are based in that state and make a sale to another location in California, any city, county or state taxes will be based on the seller’s location (origin), while any district sales taxes will be based on the customer’s location (destination).

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However, origin/destination sourcing rules work differently if you are a remote seller, meaning you are based in one state and are selling into another state where you have nexus (an obligation to collect sales tax). In this case, sales will generally be destination-based.

...

But again, if you are selling to customers in a state where you don’t have nexus, you don’t have an obligation to collect sales taxes.

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If this has helped, and you DON’T have other questions … I'd appreciate a positive rating, using the stars on your screen, and then clicking “submit" – That’s the only way I’ll be credited for the work.

...

But if you need more on this, please let me know.

Lane

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Customer reply replied 1 month ago
okay i understand i think but let me confirm...
what matters most is the nexus, so, for example,
-if your business is in a destination based state, whenever you sell something to a customer who is from another state, you do NOT hold sales tax from him. AND this also means, you have NOTHING to file or pay to YOUR OR HIS state, as far as sales tax on this correct?-but if your business is in an origin based state, no matter where your customer is from, you charge sales tax all the time, based on your location and rate, AND you file and pay this sales tax to YOUR state. correct?are both of these correct?

"if your business is in a destination based state, whenever you sell something to a customer who is from another state, you do NOT hold sales tax from him. AND this also means, you have NOTHING to file or pay to YOUR OR HIS state, as far as sales tax on this correct?"

...

Yes, exactly.

...

"but if your business is in an origin based state, no matter where your customer is from, you charge sales tax all the time, based on your location and rate, AND you file and pay this sales tax to YOUR state. correct?"

...

No. If you don't have nexus in the state of the buyer, there is no sales tax.

...

If you live in an Origin based state, you should be charging everyone in your state the rate for where your business is located. That rate could include a combination of state, county, city, and district tax rates.

...

But most states follow the ever-increasingly-confusing destination-based system. In destination-based states, the correct sales tax rate is based on where the buyer is located (the destination of the sale). The reason this can be more confusing than origin-based states is that states can have hundreds of tax jurisdictions, meaning you could potentially have to charge hundreds of different tax rates.

...

But no, if you HAVE no nexus in ANOTHER state, no one has jurisdiction to tax you. You aren't selling to your own state's residents, and you don't have nexus IN those other states.

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Now, the way states are defining nexus is become more aggressive. For example Tennessee says anyone using a warehouse in their state HAS nexus, so if you sell to someone in Tennessee, you have to collect and pay-in sales tax to tennessee in that situation.

...

For example, you sell via Amazon FBA and live in Georgia, but your products are shipped to a warehouse in Tennessee. Tennessee would consider you a remote seller. If you were based in Tennessee, you would charge sales tax based on the rate at your business’s location, because Tennessee is an origin-based sales tax state. But Tennessee is actually a destination-based sales tax state when it comes to remote sellers. So if your business is based in Georgia but have sales tax nexus in Tennessee you would do one of two things:

1.) Charge sales tax at the rate of your buyer’s ship to location

2.) Charge a flat 9.25%

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But the overarching formula to all of this, is that you only charge sales tax when you are selling to a resident OF a state where you have nexus

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Customer reply replied 1 month ago
then, if your business is ONLY in your state, and NO nexus in another state, this means, having a business in origin or destination based state has no difference right? because if you sell to your own state residents, you charge at your state rate anyway in both cases, and, if you sell to other states residents, you never charge a sales tax, since you do not have nexus in those other states. correct?but when/if you have nexus in other state, if you are in destination based state, you charge your customer at that other states' rate and file and pay to that other state, but if you are in origin based state, you charge him based on YOUR state rate and pay and file this to YOUR state, correct?

On the first paragraph that's not exactly correct. Because of the variance in municipal and other LOCAL sales taxes.

...

On the second paragraph, no, you ONLY use the state's sales taxes that apply. Let's say you live in CA and sell to someone in GA.

...

But becasue you have a sales office in GA you have nexus there. You'd charge GA rates (and if GA is a destination based state you'd need to look to see about local add-ons

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Customer reply replied 1 month ago
okay so for first paragraph, for the case of no nexus in other state, selling to out of state customers is same no matter if you are in origin or destination based state and in both cases you charge or file no sales taxes....but selling to your own state customers is different because if you are in origin based state, (such as TX), then when a TX resident buys from you, you charge everything based on YOUR location, meaning, state tax plus your own county and city tax, but, if you are in a destination based state such as WY, then, you will charge a WY resident the wyoming rate, plus your customer's county and city rate.and in the case of nexus in other state, no matter YOU are located in TX or WY, if you sell to a customer where you have nexus, you hold sales tax based on your customers state and municipality IF your customer is in a destination based state , or, if your customer is in an origin based state, then you charge based on your nexus office's origin, meaning your nexus state rate plus your nexus county and city rate.did i get it right this time?

"okay so for first paragraph, for the case of no nexus in other state, selling to out of state customers is same no matter if you are in origin or destination based state and in both cases you charge or file no sales taxes.... "

...

That's correct

...

"but selling to your own state customers is different because if you are in origin based state, (such as TX), then when a TX resident buys from you, you charge everything based on YOUR location, meaning, state tax plus your own county and city tax, but, if you are in a destination based state such as WY, then, you will charge a WY resident the wyoming rate, plus your customer's county and city rate"

...

That's exactly right

...

"but selling to your own state customers is different because if you are in origin based state, (such as TX), then when a TX resident buys from you, you charge everything based on YOUR location, meaning, state tax plus your own county and city tax, but, if you are in a destination based state such as WY, then, you will charge a WY resident the wyoming rate, plus your customer's county and city rate"

...

ooooo so close! :0)

...

You never charge your own state's rate to someone in another state. You simply treat the sales in that other state as in paragraph 2, but whatever gives you nexus in that state (say a distribution center or a branch office) become YOUR location for purposes of paying sales taxes to hat other state where you have nexus.

...

Origin vs destination is an intrastate (within the state) issue.

...

Only nexus is an interstate (what you might have to do in another state) issue

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Customer reply replied 1 month ago
thanks )but to the same thing i wrote (to the paragraph 2 of 3 in my last message) first you said exactly right to it, then you said so close, to the exact same paragraph... i assume where you said so close, you meant my last paragraph right? so in my previous message, the first 2 paragraphs i wrote is ok right?and for third paragraph of my last message, i think we are saying same thing, that, the location of your nexus is important, and not your primary state, when you sell to that person in your nexus state. so if your nexus state is an origin based state, you charge that person your nexus state plus your nexus local taxes, and, if your nexus state is destination based state, you charge him your nexus state rate, plus, HIS local tax rate.if i still didnt get it right, it is ok, as long as the first 2 paragraphs in my last message was ok, because for the foreseeable future i do not intend to make any nexus anywhere.

Sorry, looks like the copy of the first paragraph was still on my clipboard.

...,

But yes what you've just said is spot on ... in that third paragraph, it's about WHERE your location is that's causing the nexus, in that other state.

...

And yes, if you don't have nexus anywhere but your home state, you only need to worry about whether your own state is origin or destination based.

Lane
Lane, JD, CFP, MBA, CRPS
Category: Capital Gains and Losses
Satisfied Customers: 12,875
Experience: Have been providing Financial and Tax advice for 30 years.Concentration in Corporations, Estate, Income Tax and Business Planning
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Lane, JD, CFP, MBA, CRPS
Category: Capital Gains and Losses
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