As discussed, Sales tax in the U.S. is a tax imposed on the sale of goods and certain services to the end consumers. Generally, the ultimate responsibility for collecting sales tax lies with the seller at the point of sale to the final consumer, and the tax is calculated as a percentage of the purchase price. This may also include a foreign seller.
It is important to note that there could be multiple levels of sellers in the supply chain, including manufacturers, wholesalers/distributors, and retailers.
However, generally, retail sales to the end consumer trigger the collection of sales tax. The retailer, who is generally the seller making the direct sale to the consumer, is responsible for collecting the tax from the buyer at the time of purchase and remitting it to the state. This may also include a foreign seller.
For example, let’s say a consumer buys a $10 T-shirt at a store. The seller charges the consumer $10.80 after adding 8% sales tax. That extra 8% or $0.80 isn’t the store’s money. It is simply the seller collecting sales tax on the government’s behalf and remitting it to the state.
Please note that tax treaties generally do not apply to state sales taxes or collection obligations. Foreign sellers are required to comply with state sales tax rules independently.
Next, let’s understand when the seller is generally responsible for collecting sales tax in the United States.