Wednesday, March 18, 2009

Golden Rule: Sales Tax is a Tax on the Transaction

This is a very important thing to remember as you begin to understand the theory of sales and use taxes, particularly with regard to interstate commerce. Sales tax is a tax on the sale itself. Hence its name. It is a tax on the transaction.

There will be situations where the sale can't be taxed for one or more reasons. Because of this problem, the states had to invent another tax. Yes, you've got it. Use tax. Use tax is the plug when a loophole in the sales tax law allows a transaction to go untaxed.

We'll discuss the loopholes in the future.

Sales Tax Guy

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