State Sales and Use Tax Returns

Currently forty-five states along with the District of Columbia, Guam and Puerto Rico assess some form of a sales and use tax. In addition to most of the states, thousands of local jurisdictions also assess sales and use tax. The breadth and complexity of these taxes makes it one of the most difficult in terms of compliance as each jurisdiction has its own specific set of rules with respect to these taxes.

Sales tax is a consumption tax assessed on the gross proceeds of sales within the applicable jurisdiction of those engaged in the business of selling tangible personal property at retail. Tangible personal property is generally defined as tangible inventory being sold and, in some jurisdictions, may include certain services. In addition to a sale in the ordinary course of business, sale can be defined, in some jurisdictions, to include the lease of tangible personal property as well. It is generally the responsibility of the retailer, should they have sales tax nexus (a requirement to collect sales tax in the local jurisdiction as a result of its physical or economic presence in the jurisdiction) to assess and collect the tax.

Use tax acts a complement to sales tax, and is a tax assessed on the sales price of tangible personal property purchased at retail for storage, use, or other consumption within a taxing jurisdiction. This tax is generally applicable when purchasing from an out of state retailer who does not have nexus in a specified taxing jurisdiction and has, therefore, not assessed or attempted to collect sales tax. Unlike sales tax, the requirement for assessment and remittance of the use tax is generally on the purchaser who will be storing, using, or consuming the tangible property within the taxing jurisdiction.

Depending on the specific rules of the taxing jurisdiction, certain exclusions or exemptions may be applicable thus allowing certain transactions to be deemed non-taxable. The specifics of those exemptions and exclusions, along with the appropriate rate of assessment, vary depending upon the statutes of the applicable jurisdiction.