IndexWhat is a sales taxWho imposes sales taxHow the tax rate is determinedVendor's sales tax collection responsibilityAs consumers, most of people are familiar with sales tax. When an individual consumer goes to a supplier, purchases items, and pays what they charge, the amount often includes sales tax on some items and not others. It is the supplier's responsibility to charge tax on taxable sales and not to charge tax on exempt sales. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an Original Essay While many of the sales tax principles that apply to an individual consumer also apply to business consumers, the company's handling of sales tax must consider a number of other factors. Among the most important is that, unlike individuals, businesses are regularly audited by state tax authorities to verify proper payment of sales and use tax on their purchases. What is a sales tax? Sales tax is usually the primary source of revenue in the states where it is imposed. This is a tax imposed on the sale of taxable items and is calculated as a percentage of the sales price. Who imposes the sales tax A sales tax may be imposed by states or other local jurisdictions. Currently, the only states that do not impose a sales tax are Alaska, Delaware, Montana, New Hampshire and Oregon. All remaining states impose some form of sales tax. Because sales tax is imposed at the state level. States often apply the tax to support industries or businesses that make up a significant portion of the state economy. In states where mining or manufacturing constitutes a large part of the economy, the tax may be structured to provide more favorable tax treatment for items purchased and used in those industries. How the tax rate is determined Tax is due to the state in which the goods are delivered and used, commonly referred to as the "destination" state. For example, if the customer visits a supplier's location and makes a purchase (a store purchase), tax is collected based on the VAT rate of the state where the supplier and buyer are located. If the buyer orders goods (for example, a telephone or Internet order) and the purchase is in State A and the supplier is in State B, and the goods are delivered to the buyer in State A, then the transaction is subject to the sales tax in State A. The general rule for determining the correct rate to apply to a transaction is to apply the rate applicable in the destination state. Supplier Sales Tax Collection Responsibilities Suppliers are required to collect taxes only in states where they have a nexus. Nexus is a legal term. Nexus describes the contact or presence a supplier may have with a state that allows the state to require the supplier to collect state sales tax. If the supplier has no nexus in the destination state, the state has no basis on which to exercise jurisdiction over the supplier and require it to collect sales tax. Please note: this is just an example. Get a custom paper from our expert writers now. Get a Custom Essay Generally, an out-of-state vendor is deemed to have a nexus to a state for sales tax purposes if it has regular systematic contact.