Q&A: Do I Need to Collect Sales Tax?

Q: Do I collect sales tax on all my sales or just those I sell in my home state? And does this tax money get claimed as income and then expensed as a deduction?

A: This is a great question and one that I get often!

Currently, online business owners and eBay sellers are not required to
collect sales taxes on items that are sold and shipped to customers in
another state.  If the state the eBay seller or business is located in
has a state or local sales tax, then you are supposed to collect sales
tax on items sold and delivered to the same state, but you do not have to collect sales taxes on sales to customers located in another state.

Sales tax collected is not income, and sales tax remitted to the state is not an expense.  So for tax purposes, you should not claim the sales tax you collect as income, and likewise, you should not deduct sales taxes remitted to the state as a deduction. 

This is just one of many questions that will be answered in my free ‘Your Top Tax Questions Answered’ teleseminar on February 14.  If you’ve got tax questions you’d like answered, please submit them here.

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