A lot of businesses are required to charge and collect sales tax on their products and services by the respective state government. In this article I will list down more about sales tax so that as a business owner you may get answers to some of your questions such as – Does my business require me to charge sales tax or what products/services require to be charged under sales tax, how to charge sales tax etc.

Before answering the above given questions, it is important to know what is meant by sales tax. It is a type of tax which is levied on certain products and services (at the time of sale) by the state government but is charged and collected by the respective business owner on behalf of the state.

That is why it is also known as the trust fund. The business owners, who collect the sales tax, later have to deposit the money to the state government’s Revenue Department.

Not all states in the USA charge sales tax. For example Oregon, Delaware, Alaska, Montana etc do not charge sales tax on their products or services. On the other hand states like Arkansas, Tennessee, and Virginia charge the most on sales tax especially for food items.

Sales tax is levied based on certain tax rate prescribed by the government which is known as the sales tax rate. Based on this sales tax rate, the business owner adds a certain amount to his/her product/service price.

Therefore sales tax is always paid in addition to the price of the product or service to the final customer. As a businessman you can never advertise anywhere on the product package or using an advertisement that you have discounted the sales tax for the customer.

At the most you can do is to add the sales tax amount to the product price and advertise one final price to the customer. In such cases you must always indicate in writing somewhere in the product receipt or bill that the price includes the sales tax.

The only class of product that does not require sales tax is prescription drugs. All other products and services sold from a state have to charge sales tax. Also if you run an online business (with no physical presence in any US states) then you don’t have to charge sales tax on your online products and services.

You will have to pay sales tax to the government if your online business has an affiliate with a physical office or branch in the state. This also means that if your customer is from another state (where you don’t have a local presence) you cannot charge the sales tax for the product purchased by him/her.