FAQ on Sales Tax Service

Q: What is nexus?

A: Nexus, also known as sufficient physical presence, is the determining factor of whether an out-of-state business selling products into a state is liable for collecting the tax on sales in the state. Nexus is created if your company maintains a temporary or permanent presence of people (employees, service people or independent sales/service agents) or property (inventory, offices, warehouses). The temporary presence is created through traveling people visiting states to call on customers or prospects, trade show attendance, or consigned inventory in warehouses. Nexus is created once a substantial physical presence is established. Unfortunately, this is not clearly defined by each state and can vary from 1 day to a number of days in other states. Nexus means a business entity has established a direct or representational presence within a particular state or jurisdiction. This presence gives the state the right to require a company to pay or collect and remit certain taxes.

Q: How do I know if I should be collecting tax in a state?

A: You are responsible for collecting and remitting sales tax to a jurisdiction if you have established substantial presence in the state of delivery. Once established, you have created nexus. The threshold for this presence differs from state to state and a company's presence in each state should be examined to determine if nexus has been established or not. A company clearly has nexus if there is a business location or there are employees living in or working in the state/jurisdiction. Once you establish nexus, you are required to register as a retailer with each state before collecting sales tax for that state.

Q: When making a sale, do you collect tax for the state that you are located in or the state where the customer is located?

A: You collect the tax for the state where the property is delivered to your customer. If the item is shipped to the customer, then tax applies for the delivery state. You should collect the tax only if you are registered to collect tax in that state. If the customer picks up the item at your location, tax should be collected for your state.

Q: What is a resale certificate and who can use one?

A: Resale certificates are used by purchasers, when acquiring property for resale in its present form or as components of other property. They are also used to purchase taxable services that become a part of property for resale in some states. States that allow for resale exemptions either accept a state issued resale certificate or, in some cases, a multi-state certificate. A business which is registered for sales and use tax can use a resale certificate only when the merchandise being purchased is to be resold by the business. A business cannot use a resale certificate to purchase merchandise that they will use and consume in the conduct of business. Any merchandise obtained upon resale certificate is subject to sales and use tax if it is used or consumed by the purchaser in any manner, and must be reported and the tax paid thereon direct to the appropriate jurisdiction.

Q: Why doesn't the out-of-state retailer collect the tax?

A: If the retailer is located out-of-state and does not have a physical location or other type of physical representation in the state, the state cannot require the retailer to collect their sales tax. However, some out-of-state retailers voluntarily collect the tax as a convenience to their customers. If the retailer does not collect the sales tax, the purchaser has the obligation to pay the use tax directly to the state where the property is used as long as the item is taxable.

Q: Is a sales tax return required even if my sales equal zero?

A: Yes. Every business with a sales tax license is required to file a return even though no sales were made during the period covered by the return. However, if you have seasonal sales or your sales tax liability has declined, you may request less frequent filing from the state.

Q: How do I send my sales record to you?

A: We will need you to complete our Monthly Sales Record which can be found in our website under Forms and email the completed forms to us at payroll@greatwaysinc.com.

Q: How much does the sale tax service cost?

A: Our sale tax service starts at $100.00 a month, which includes one retail location.

Q: If I have any more questions can I contact you?

A: You are always welcome to contact us by email payroll@greatwaysinc.com or by phone 630-663-1500 x 2 For Sale Tax Service and x 1 for Pramod Zacharias. Our preferred way of communication is Email.