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Sales Taxes

Sales & Use Taxes

Sales taxes are collected by business owners who sell products to their clients.  Sales tax returns are generally due monthly.  States, counties, and localities vary on their tax rates so owners should determine with their tax accountants where their businesses have nexus, and make sure they have the required tax licenses, and that they file the required sales tax returns when due.

Use taxes are imposed on businesses who provide services and other businesses who use products for internal use in their businesses.  If businesses pay the sales tax within their own locality, and keep their purchase receipts, then they do not need to report these transactions on their annual use tax returns.  Any purchases of goods to use internally in a business, must be either paid for at the point of sale with receipts retained, or reported on the sales tax return at the wholesale pricing or the pricing of the locality (ieas) outside of the business location.  If businesses have paid for items outside of their business area, and sales tax rates are cheaper than in their business location locality, then they should pay the difference up to the sales tax rate of their locality when reporting on the sales tax return.  The same sales tax rates as used on sales tax returns will be used on use tax returns.   States, counties, and localities vary on their tax rates so owners should determine with their tax accountants where their businesses have nexus, and make sure they have the required tax licenses, and that they file the required sales tax returns when due.

Download a free sales tax table from reputed company Avalara - they update it monthly at https://www.avalara.com/taxrates/en/download-tax-tables.html and we highly recommend them as great vendors if you do a lot of sales tax reporting.

Thank you for using QuickBooks Sales Tax. Each month, states make changes to rates and rules. To keep you ahead of these changes, we have put together the following summary of rate and rule changes that will occur in QuickBooks Sales Tax this month and may affect your business transactions. Knowing these changes will eliminate surprises to you or your clients. You can use our free sales tax calculator anytime to find rates for any US address.

RATE UPDATES

Rate changes will take place in the following locations on July 1, 2021. All states that are listed have local rate changes unless otherwise noted as also having a state rate change.

Alaska (Nome)
Illinois Missouri Virginia
Alabama (Butler, Flomaton) Iowa* Nebraska* Utah*
Arkansas* Kansas* North Dakota* Washington*
California Louisiana** Oklahoma* Wisconsin*
Colorado New Mexico South Dakota* West Virginia*
Georgia* Minnesota* Texas

*The rate change files for all SST states can be found here.

**Calcasieu ParishEvangeline ParishNatchitoches ParishOrleans ParishSt. Mary ParishTangipahoa Parish

SALES TAX HOLIDAYS

Alabama's annual back to school sales tax holiday runs from Friday, July 16 through Sunday, July 18. During the holiday, the following items are exempt from state sales tax and depending on the city or county, may be exempt from local tax as well.
  • Clothing apparel suitable for general use, priced $100 or less
  • Computers, computer software and school computer supplies, priced $750 or less
  • School supplies, school art supplies and school instructional material, priced $50 or less
  • Required textbooks on an official school book list, priced under $50
  • All other books, priced $30 or less
In QuickBooks all Alabama locals are included in this holiday and are set to apply the above threshold exemptions to the qualifying product categories, users may override the default local exemption setting.

Florida's 2021 Freedom Week Sales Tax Holiday will take place from July 1st through July 7th. During this time consumers can purchase qualifying recreation and outdoor items and admissions to entertainment and cultural events exempt from tax. Qualifying items ranging from fishing tackle to canoes and kayaks will be exempt to a specified threshold. More detailed information can be found in this Tax Information Publication.

For the duration of these sales tax holidays the impacted tax categories have been updated to apply a tax threshold exemption or fully exempt where required. Please note that we do not have tax categories for many of these products but are exploring enhancements to address this recently enacted type of sales tax holiday in Florida.

There will also be a Back to School sales tax holiday in Florida, which will run from July 31st through August 9th. More detailed information regarding this sales tax holiday will be included in the August update email. During the holiday no sales tax or local option tax (also known as discretionary sales surtax) will be collected on the purchase of clothing, footwear and certain accessories selling for $60 or less per item, certain school supplies selling for $15 or less per item, and the first $1000 of the sales price of personal computers and certain computer-related accessories when purchased for noncommercial home and personal use.

Mississippi is holding its annual clothing and school supplies sales tax holiday on July 30, 2021 and July 31, 2021. During this tax holiday period, Mississippi sales taxes are not collected or paid on purchases of articles of clothing, footwear, or school supplies if the sales price of a single item is less than $100. For the purpose of the sales tax holiday, the following definitions apply:

  • Clothing is any article of apparel designed to be worn on the human body including pants, shirts and blouses, dresses, coats, jackets, belts, hats, undergarments, and multiple piece garments sold as a set.
  • Footwear is any article of apparel for human feet except for skis, swim fins, roller blades, skates, and any similar items.
  • Accessories such as jewelry, handbags, luggage, umbrellas, wallets, watches, briefcases, and similar items do not qualify for the Sales Tax Holiday.
  • School Supplies means items that are commonly used by a student in a course of study.

Puerto Rico is holding its annual back to school sales tax holiday July 16, 2021 and July 17, 2021. During this time, certain school uniforms and school supplies will be exempt.

Tennessee is holding a new sales tax holiday for sales of gun safes and safety devices July 1, 2021, 12:01 a.m., and ending June 30, 2022, 11:59 p.m. Tennessee defines these products as follows:

  • Gun Safe – a locking container or other enclosure equipped with a padlock, key lock, combination lock, or other locking device, designed and intended for the secure storage of one or more firearms.
  • Gun Safety Device – any integral device equipped or installed on a firearm and which permits the user to program the firearm to operate only for specified persons designated by the user through computerized locking devices or other means integral to and permanently part of the firearm.

Tennessee's annual back to school sales tax holiday runs from Friday July 30 through Sunday August 1. During this tax holiday, the following items are exempt from state and local sales tax:

  • Clothing, priced $100 or less, per item
  • School supplies and school art supplies, priced $100 or less, per item
  • Computers, including laptops as well as tablets, priced $1,500 or less

Tennessee is also having a sales tax holiday for food, food ingredients and prepared food. The holiday runs from July 30 through August 5. During this period, food, food ingredients, and prepared foods are exempt from sales tax. This includes qualified sales of prepared food by restaurants, food trucks, caterers, and grocery stores, but does not apply to sales of alcoholic beverages, tobacco, candy (without flour), or dietary supplements.

West Virginia's new back to school sales tax holiday will take place Friday July 30 through Monday August 2. During this time, state and local sales tax will not be charged or collected on the sale of:

  • Clothing and footwear if the sales price is less than one hundred ($125) dollars per item
  • School instructional materials ($20) per item
  • School supplies ($50) per item
  • Sports equipment ($150) per item
  • Laptops and Tablets ($500) per item
For the duration of these sales tax holidays the impacted tax categories have been updated to apply a tax threshold exemption or fully exempt where required.

Sales Tax Holiday Product Mapping

To help you get the most out of this year's sales tax holidays, special sales tax holiday tax categories are provided in the Sales Tax feature in QuickBooks Online. If you are selling an item that qualifies for a sales tax holiday exemption in your state, but do not see a tax category that fits that item, you can map the item to the appropriate sales tax holiday category to capture the exemption. These categories can be found under the Product set–up under "Choose a special category > Sales tax holidays".

WAYFAIR UPDATES

Florida
Effective July 1 remote sellers with over $100,000 in Florida sales in the preceding calendar year will need to register and collect the Florida sales tax. Affected businesses have until September 30 to complete a Florida Business Tax Application and avoid a "look back" review of previous remote sales and use taxes due. This is a result of a new law, Chapter 2021-2, Laws of Florida.

Kansas
Effective July 1 remote sellers with $100,000 or more in Kansas sales in the preceding or current calendar year will need to register and collect the Kansas sales tax. Prior to the passing of SB 50, the Kansas Department of Revenue took the position that existing law already imposed a collection obligation on all remote sellers and did not provide a "small seller" exception.

SALES TAX NEWS

Colorado
Colorado recently extended the small business exception to its destination sourcing rules from July 1, 2021 to February 1, 2022. Starting next February, all Colorado retailers will be required to collect Colorado state and local sales taxes based on the Colorado locations for where goods are delivered or services are performed.

Kentucky
Kentucky announced in its June Sales Tax publication, that starting October 1 sales, consumer's use, and transient tax, as well as waste tire fees, must be reported and paid electronically, via the state?s One Stop Portal.

New Mexico – July 1st Sourcing Change
Starting July 1 New Mexico is switching from origin-based sourcing to destination-based sourcing. This is a significant change for many New Mexico based businesses. Most taxpayers now pay the GRT rate for the location of their business, and retail operations will continue to do so for most sales completed at their business locations.

If you ship a good to a New Mexico customer, the rate that applies will be the rate at the Ship To address, with limited exceptions. This will be the case for both in state and out of state businesses, prior to July 1 only the state rate applied on out of state sales into New Mexico. QuickBooks Automated Sales Tax will automatically calculate using the new destination-based sourcing rules using the address information provided. The proposed regulations can be found HERE.

COVID-19 AND YOUR BUSINESS

COVID-19 has forced many small businesses to pivot and evolve. Some are providing new services to customers, others have started selling completely different products. Many have moved to an entirely online business model. These business changes may impact sales tax obligations.

We are here to help.

Have you started selling out of state? Have your out of state sales increased? Take a look. Sales to other states may trigger an obligation to charge and remit sales tax in the state, even if you don't have a physical presence there.

Has your business begun selling new products? Or are you providing a new and different type of service to customers? What you sell may impact the tax rate you charge and collect. QBO Tax Categories can help ease the burden of determining taxability


Please note that these are the changes that have been released by the states as of the date of this e-mail and there is a possibility other small changes could be enacted late or retroactively by the states.


QuickBooks has been updated to account for these changes. Now you will get the updated rates and rules applied automatically to your invoice. Click below to try it out.

Create an invoice
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Other sales/use tax information TBA.  Please check back at least monthly for any updates.

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