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Sales and use tax

This article applies to:AvaTax

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 tax, use tax (also called sellers use tax), or both. To help you determine which tax type to select, review your tax permits, registration, and tax return forms. 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.

Sales and use tax

  • 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.
  • Sales or 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.

Intrastate and interstate transactions

In many states, the sales and 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.

U.S. sales tax types

When you add a U.S. state or territory to Where You Collect Tax, you may be prompted to select a Tax Type option. This happens if the state has different rates for sales tax and sellers use tax. Some states collect sales tax but not sellers use tax, which means you don't need to select a tax type option for those states. If you are prompted to select a Tax Type option, make sure you select the right tax type for your business.

  • 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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