US Taxes

Hi,

I'm just trying to find out how US Taxes work so I can develop my database to work accordingly. I beleive that in some states of the US you have to pay a tax on products that you buy.

What I would like to know is if that Tax is a percentage amount or just a fixed amount?

So if I bought 5 products would I pay a percentage of the value i Tax, or a fixed amount per item.

Thanks

It is certain % of cost, and in pretty much every state it is different. Check this out -> http://www.taxfoundation.org/variousrates.html

It is not just different per state, but also different per city.
Where I live the sales tax on something is 9%, in the town I use to live the sales tax is 8%.
But you are right, it is a percentage, and it usually varies between 5 to 10%.

Fortunately, for e-commerce one doesn't need to worry about municipality or county taxes. The only time a sales tax is collected (and then only the state tax) is when the seller does business in the state in which the purchaser lives. The definition of "doing business in a state" is that the business has offices or is incorporated in that state.

Rod,

Just to clarify your post for myself as you used some long words

If I lived in Texas and sold my stuff via a site to someone in New York then I don`t need to worry about the Tax, but if I sold something to someone who lived in Texas, then because I am based there I would need to worry about the Tax??

Sorry if it sounds like a dumb question but us Brits have a totally different system.

I've seen the headaches VAT can bring on. I've always said I'd move if the US ever got a VAT.

Anyway, yes, you understand correctly.

That's how it stands now. IIRC, congress just extended the moratorium on interstate taxation for another 3 years.

Do you want to hear something unbelievable?
Where I live (Alabama), when you file your state taxes, there is a section on the form for you to file how much you purchased out of state via e-commerce so that you can be charged state taxes on this amount also.
How unbelievable is this?

Unfortunately, THAT is legal. The state of Alabama can't force my business (incorporated in PA) to collect state taxes, but it can do what you describe.

The good news is that the state would have a tough time proving what you spent without a search warrent. The business wouldn't report it, your credit card company wouldn't report it so if you don't report it the state can't know.

Depends on what you want to risk. Sounds like the only people that would ever get convicted of not paying their sales tax in this manner would be those that were being investigated for something else and therefore the state was able to subpeona financial records (i.e. the credit card purchases).

I agree and believe that. It is funny to me thought that they would even attempt this.

Thanks mate

To be honest though I have never found VAT to be that daunting, at the moment I don`t have to use the VAT system because you have to have a turnover greater than £54,000 per year or something like that and none of my companies even get close to that figure. But if I did have to pay it, it wouldn`t bother me that much, all you do is add 17.5% to the value of each invoice, make sure you keep all your receipts and give it all to an accountant and let him have the headaches.

The problem with VAT, at least the way Clinton wanted to implement it here, is that it is more inflationary than a sales tax of the same amount.

Ah thats probably the difference then, our VAT rate has been 17.5% for neons of years.