I don’t know about you but I don’t want to pay more taxes than I have too. Why give more money to the government?

So... when I learned this secret that most business owners don’t know, I stopped overpaying in sales tax.

The secret is this:

You don’t have to pay sales tax on all the sales you make.

Stay with me. I taught this in the Is Your Business Legalproof? class (sign up for the next one here).

See every state has their own sales tax laws or rules. Every state has a list of products or services that must be taxed and those that aren’t taxed.

Up until 2021, Maryland didn’t tax digital products. Only physical products were taxed. So it’s possible that if your state doesn’t tax digital products yet, you could be saving on sales tax.

Now, here’s the the thing:

Just because you make a sale of a taxable product or service doesn’t mean you owe sales tax.

Sales made only in the state are to be taxed. Selling online means your buyer isn’t making the sell in the state, but their state. How many of your sales are out-of-state?

Don’t stop reading yet.

While the above is true, you must understand that states are classified as either an origin or designation based sales state. Meaning sales tax is owed for sales based on where they originated or where the product is being delivered (final destination).

Maryland is a destination-based tax state. So, while digital products to Maryland buyers are taxed, sales to non-Maryland buyers don’t require me to pay Maryland sales tax because that tax is owed to the destination state. I won’t have to pay them until I hit their required number.

However, if Maryland were an origin-based state, I would have to pay them ALL the sales tax for in-state and out-of-state buyers.

This is one secret to not paying too much in sales tax. But, oh the day, to pay another state sales tax because that’s means you made either 200 transactions or at least $100,000 in sales in that one state.

Question: Do you have a sales tax license?

If no, your sales could be illegal!

Find out if any other part of your business isn’t quite legal in my upcoming, Is Your Business Legalproof? class.

Register here for free. Replay only available to registered attendees.

Disclaimer: This post is for educational purposes only and is not legal advice. Please consult an attorney.