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Avalara Help Center

Should I use sales or use tax in SalesTaxII?

Overview

I would like some guidance on whether I should select sales or use tax in SalesTaxII.

Environment

SalesTaxII 

Resolution

SalesTaxII, as shipped, is pre-set to calculate Seller’s Use Tax in all states in which you collect and remit
tax. However, there are conditions under which your company must collect and remit Sales Tax.

 

Generally, if your company has presence in a taxing jurisdiction you will be considered to have Nexus in
that jurisdiction and you are required to register with that jurisdiction and remit tax. The type of tax you are
liable for is determined in part by the type of presence you have in that jurisdiction. A “permanent”
physical presence (office, warehouse, retail outlet, a resident sales person, etc.) generally obligates you
to remit sales tax. Presence of a “transitory” nature (salesmen, repairmen, installers, etc. who visit the
state intermittently) generally obligates you to remit seller’s or vendor’s use tax. Not all states distinguish
between these types of tax, in which case you will simply be liable for “sales” tax.

 
A modifiable table is provided for you to change the tax type for each state for these conditions. The table
can be viewed or modified from SalesTaxII menu item ‘Table Maintenance’.

 

  • Nexus is an extremely complex situation and subject to much interpretation. Requirements vary greatlybetween jurisdictions. The comments made above are general in nature and not meant to cover everysituation.

 

  • The difference between having Nexus and being “registered” is an extremely important one. Once it isdetermined a seller has nexus in a jurisdiction, the seller should register with that jurisdiction to collectand remit the appropriate type of tax. Sellers should not collect tax unless they are registered to remit it.

 

  • Collecting but not remitting tax may be construed as fraud by the jurisdiction and may subject the sellerto significant penalties.


We strongly recommend that you consult with your accounting department or sales tax consultant to assist with this task.