Explore Sales Tax by State in the U.S.

If your business operates in several states,  you’re likely familiar with how challenging it can be to remain compliant. Some states make the job especially difficult, with complex rules that can easily snag even the most careful businesses.

In this article, we're going to talk about the top ten trickiest states for filing sales tax by state and give you some insight into how to approach these difficult states.

How State Sales Taxes Affect Consumers

California | The State of Varied Tax Rates

California’s vast economy and diverse tax laws make it one of the most challenging states for sales tax compliance. With a mix of state, county, and local district taxes, figuring out the correct tax rate for each transaction can feel like a puzzle. In addition, the unique rules California imposes on tax exemptions and deductions further burden the filing process.

Why should you care?

If your business operates in California, Getting the rate wrong or forgetting some form of exemption for your California business might lead to costly mistakes. It's worth it to watch out for these rate and rule changes.

New York | High Rates and Complicated Rules

New York imposes different tax rates for a wide range of goods and services All of this makes compliance a headache. And New York also has one of the highest state sales tax rates in the U.S., making things even more of a challenge.

Why should you care?  

Operating in New York means dealing with these high rates and complex rules, which can be especially burdensome if your business sells a variety of products.

Texas | A Decentralized System

Texas conducts its sales tax in a decentralized way with local jurisdictions having to impose an area tax on the state tax rate, leading to a variety of sales taxes within the state. This variance can make it confusing for businesses, more so for multi-locational ones, especially those are different tax rates throughout different states.

Knowing the local tax rates and rules will keep you in compliance and avert mistakes if you are operating in Texas.

Florida | A Maze of Exemptions and Exclusions

Florida sales tax laws have numerous exemptions and exclusions that require a very high level of detail orientation. The state also exposes a higher sales tax rate than the others making it harder to stay compliant.

Why should you care?

One wrong exemption or one date missed in applying a changed rate could result in incorrect filed numbers.

Illinois | High Rates and Complex Rules

Illinois is known for its high state sales tax rate and complex rules around exemptions and deductions. Additionally, there are also some services subject to tax, increasing the complexity of navigating sales tax by state even more.

Why should you care?  

Careful and thorough consideration is required to navigate the Illinois sales tax system to keep your business in compliance.

Pennsylvania | Varying Rates and Local Taxes 

Pennsylvania’s sales tax laws are complicated by varying tax rates imposed by local jurisdictions, in addition to the state rate. This makes it crucial for businesses to understand local tax rules and comply with the state’s exemption regulations.

Why should you care?  

Operating in Pennsylvania means staying updated on local tax rates and ensuring accurate filings to avoid penalties.

Washington | Unique Tax Structures

Washington’s sales tax system is unique due to its Business and Occupation (B&O) tax, which taxes gross receipts rather than sales transactions. This adds an extra step of complication for a business, especially if it's not a Washington business in the first place.

Why should you care?  

If you're doing business in Washington, knowing the B&O tax and how that factors into your sales tax responsibilities is key to compliance.

Ohio | Ever-Changing Tax Landscape

Ohio has a state sales tax rate, but local jurisdictions can levy additional taxes, Frequent changes in the laws regulating Ohio sales tax makes it hard for businesses to always stay on the good side of the law.

Why should you care?  

To avoid surprises, businesses in Ohio need to monitor legislative changes and understand how they affect sales tax compliance.

Louisiana | High Rates and Service Taxes

Louisiana has a simple sales tax system, but the tax rates tend to be high in comparison to other states. Additionally, the sales tax system in Louisiana is complemented with detailed information on exemptions and deductions. Like many other states, it also taxes many services.

Why should you care?  

For businesses in Louisiana, staying compliant means navigating these complex rules and understanding which services are taxable.

Colorado | Complications with Local Jurisdictions

Colorado's sales tax laws are complicated due to additional imposed taxes by local jurisdictions. With this, businesses need to be well-informed about the different tax rates and the rules about exemptions and deductions, particularly including online sales.

Why should you care?  

If your business operates in Colorado, keeping track of these local variations is essential for accurate tax filings.

Expanded Nexus

What is Nexus?  

Nexus refers to the connection between a business and a state that requires the business to collect sales tax. Traditionally based on physical presence, the concept of economic nexus has expanded since the 2018 Supreme Court ruling in South Dakota v. Wayfair, Inc.

Why should you care?  

Since this ruling, 46 states have already adopted economic nexus provisions, which make collecting and remitting sales taxes a must-do for remote sellers. Understanding the nuances of sales tax by state and if your business has a nexus in a tricky state might seem overwhelming, but non-compliance can cost you a lot in the way of penalties.

How Kintsugi Can Help

Sales tax compliance in these tricky states can drain your resources and time. Kintsugi offers expert guidance and tools to help you stay compliant. Whether you’re dealing with complex nexus issues or trying to understand new exemptions, Kintsugi has you covered. Stay ahead of the curve and ensure your business remains compliant with the ever-changing tax landscape.

So remain compliant and have the confidence to tackle anything with Kintsugi by your side.

This is achievable, though very challenging, for your company to overcome the scale of compliance in several of these difficult states and their sales tax laws. Awareness of the intricacy and staying informed will make your business confidently geared up toward such challenges. With Kintsugi, be rest assured that your business gets the best expertise to stay compliant into 2023 and beyond.