As your small business clients grow and sell in more states, so too will the challenge of learning the process of collecting and filing sales taxes and related exemptions.
Because every state has its own rules (and certificates!) for tax exemptions it can make knowing what to do even more challenging. These exemptions can be based on the product, the intended use of the product or even the status of the buyer.
Here are the three main types:
1. Product-based exemptions
In some states, for example, grocery items are exempt from sales tax. It gets tricky because these exemptions can then have rules within rules: Prepared foods, such as a ready-to-eat rotisserie chicken purchased from the deli, may be taxable; at the same time, a package of chicken breasts the buyer will cook at home might be exempt.
2. Use-based exemptions
About Mike Plaster
Mike Plaster is a former journalist who now owns and runs a small business. He began a partnership with Avalara in 2018, aiming to shed light on issues important to small business owners and Amazon sellers.