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Sales and sellers use tax

This article applies to:Avalara AvaTax Update

To properly register a business within the U.S. and correctly file and pay tax, you need to understand whether you’re responsible for paying sales or sales and sellers use tax. 

Review your tax permits, registration, and tax return forms to help you determine which tax type to select.  Or, ask a tax professional if you aren't sure about the tax reporting requirements for your business.

The tax type you select should match the tax return you need to file, especially in AL, AR, CO, IL, KS, MS, MO, OK, VA, and WV.

Tax types

  • Sales tax
    A transaction tax in the U.S. paid by an in-state seller who is registered to collect and pay tax in that jurisdiction. If your company has a physical location in a state, you may need to collect and pay sales tax.
  • Sellers use tax
    A transaction tax in the U.S. paid by an out-of-state seller who does not have a physical location in the taxing jurisdiction. If your company does not have a physical location in a state but has customers there, you may need to collect and pay sellers use tax.

Transaction types

In many states, the sales and the sellers use tax rates are identical. In those states, there's no difference between an intrastate transaction and an interstate transaction.

  • Intrastate transaction
    A transaction in the U.S. where the origin and destination are located in the same state.
  • Interstate transaction
    A transaction in the U.S. where the origin and destination are located in different states.

Sales tax types in the U.S. 

When you add a U.S. state or territory that has sales or sales and sellers use tax, you must select the appropriate tax type for that jurisdiction. 

  • Sales tax
    • Processes both intrastate and interstate transactions using sales tax rates.
    • Processes transactions more conservatively.
  • Sales or sellers use tax
    • Processes intrastate transactions using sales tax rates.
    • Processes interstate transactions using sellers use tax rates.
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