Andrea left this question as a comment:
I have an online business based in California. I currently ship from Nevada. I want to also start shipping from Illinois. My question is -do i need a business license and/or to pay taxes in NV and IL?
Jeanne Cole, our contributor from the Small Business Development Center, offered this information about sales taxes:
My general answer is that they would need to check with each individual state because many are different. In OK sales tax is based on point of delivery. So if you shipped out of state you wouldn’t charge any OK sales tax. If you ship from Alva to Woodward you charge sales tax for the city of Woodward and the county as well as the state, but as I said, each state is different!
Each state has a revenue office of some sort. In OK is it the Tax Commission; other states may call it something different, but they all have them. (Illinois is Dept. of Revenue) and there is a site for multistate help http://www.mtc.gov/ that could be beneficial. If all else fails, a simple Google search for that states agency offices should get them where they need to go.
GlennaMae Hendricks, our income tax expert, offered this income tax information:
Well, the easiest one is Nevada which levies NO income tax.
Income Tax in Nevada
The Nevada Department of Taxation receives an enormous number of inquiries regarding issues relating to Federal Income tax. The State of Nevada does not participate in the administration of Federal Income Tax nor does it levy a State personal, business or corporate income tax.Illinois, on the other hand, imposes a state income tax.
The Illinois Income Tax is imposed on every individual, corporation, trust, and estate earning or receiving income in Illinois. The tax is calculated by multiplying net income by a flat rate. The Illinois Income Tax is based, to a large extent, on the federal Internal Revenue Code (IRC).
The key here seems to me to be “earning or receiving income in Illinois.” Which would indicate to me the situs of the income is the governing act–not the shipment from (unless the “shipment to” is within Illinois).
Most states which do assess income taxes, do it based on the same basis as the sales taxes: i.e., if I (who live in Oklahoma) buy something that originates in Kansas, the income for the seller is earned in Oklahoma.
Clear as mud?
Interstate tax issues are notoriously complex. I think the best advice is to talk with a local source of information. I’d start with the local Small Business Development Center in the state where you have the question.
And if you have a question about small business, feel free to leave us a comment, or ship us an email.
New to SmallBizSurvival.com? Take the Guided Tour. Like what you see? Get our updates.
- How has 2020 changed the challenges rural small towns face? Tell us here - October 20, 2020
- The Idea Friendly Method to surviving a business crisis - October 6, 2020
- Join me for the Rural Renewal Symposium online Oct 13 - September 26, 2020
- Cheap placemaking idea: instant murals - September 11, 2020
- Refilling the rural business pipeline - July 7, 2020
- Huge vacant buildings: grants to renovate? - June 9, 2020
- Economic self defense for small towns - June 7, 2020
- The best things you can do for local businesses in light of coronavirus - March 27, 2020
- How to get more parking downtown without adding any spaces - March 7, 2020
- Exact Yeti Blue mic volume and Windows settings to reduce background noise - February 17, 2020
As I finished an online purchase this a.m., I noticed that the “Sales Tax” line on the invoice was marked with an asterisk ( * ). When I traced the notation for the *, I found “By law, we charge sales tax only on products shipped to New Hampshire and New Mexico.” Interesting that some vendors are beginning to post this information.
I will be looking for more of this kind of notation in the future.