Beware the Changing Rules for Sales Tax

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If you sell anything, you’ll want to pay close attention to some state laws that are changing that can really affect how and when you collect sales tax.

For a good primer on the current situation and what is happening on a state-by-state basis, please check out the online workshop I just finished for eBay. You can access it at You can also see archived workshops at

We’re in the middle of a potentially huge change in sales tax. In the past, sales tax has been due based on the origin of a sale. In other words, if my business is located in Arizona and we sell to someone in Arizona, then I am required to collect and pay sales tax. If I sell from Arizona to someone in Connecticut, I am not required to do so.

Under a national movement called the Streamlined Sales Tax Project (SST), sales tax would be required to be collected for ALL states, based on the destination of sale. So, if I sell from Arizona to someone in Connecticut, I will be required to collect Connecticut sales tax.

It’s going to take a Constitutional amendment to make the change and that requires ratification by 2/3 of the states. Currently there are 22 states fully on board and a dozen or so making changes to their state rules so that they can get involved as well. What was once a distant possibility, looks to be turning into real law.

During the workshop that I did this past week, I got a question that I couldn’t answer. I promised to answer it in my 9/12/08 (that’s today) blog. Here’s the question and answer:

I was asked whether use tax is due on an item that is given away for promotional purposes. I have to say, I didn’t know and needed to research. The answer, I found, was “it depends.” I researched some of the states that I knew some of my eBay seller participants came from. Here’s some of the answers: Connecticut: Not required. Texas: I couldn’t find a thing that addressed it one way or another. I’m going to guess yes. Illinois, California, Louisiana: Yes, it is required based on your cost for the product.

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