If you are selling online, then you may be responsible for collecting and remitting sales tax to any of the over 12,000 tax jurisdictions in the United States. Each of those jurisdictions has different tax rates and product taxability rules. First and foremost, if you are a business that has offices and/or warehouses physically located in Wyoming, you must obtain a sales tax license from the Wyoming Department of Revenue and collect and remit sales tax at the rate charged in the county where your product is physically received.
To understand your responsibilities in other states, let’s start with the basics. Sales tax is known as a “consumption tax” because the tax is only charged when a customer purchases goods or services they intend to “consume.” The business acts as a pass through entity that collects the tax upon sale and remits the money to a state and/or local government. Governments use the tax receipts to pay for schools, roads, public safety and other obligations. In Wyoming, the state sales tax rate is 4%, but counties can add on additional taxes if approved by their voters. In other words, in Wyoming, tax rates may vary by county.
In the United States, retailers are required to license, collect and remit sales tax from customers in states where the company has either physical or economic nexus. The term “nexus” is defined as “as means of connection, tie or link.” In terms of sales tax, the phrase means that a business has a connection to a jurisdiction that creates the obligation to collect and remit sales tax. The definition of sales tax nexus varies by state, and businesses are responsible for understanding and obeying the laws in every state where they do business. Typically, if a business has any kind of physical location in a state, employees or contractors working in a state, stores inventory, or does sales at a trade show, they are considered to have physical nexus there.
If you are a remote seller and conduct a certain amount of economic activity in a state, then you may have “economic nexus” there, even though you do not have any physical presence. For example, in Wyoming, economic nexus is triggered at the point that sales of tangible personal property, admissions or services in Wyoming exceed $100,000 or if the seller makes 200 or more separate transactions for delivery in our state in the current calendar year or the immediately preceding calendar year. These definitions vary by state, and the seller is responsible for collecting and remitting sales tax whenever economic nexus occurs.
To make things even more complicated, some states have origin-based sales tax collection, whereas others collect on the basis of destination. Origin-based locations collect sales tax at the rate of the seller’s location. Sales tax is assessed at the rate of the buyer’s location where the tax is destination-based. In Wyoming, sales tax is destination-based.
Products that are taxable also vary from state to state. Most states tax what is called “tangible personal property.” Wyoming defines tangible personal property in part as personal property which may be seen, weighed, measured, felt, touched or which is in any other manner perceptible to the senses. Some items that are considered necessities are not taxable in every state, such as groceries and clothing. Groceries are not taxable in Wyoming.
There is some relief if you sell through what is called a “third party marketplace facilitator.” A “Marketplace Facilitator” is defined as a marketplace that contracts with third party sellers to promote the sale of physical property, digital goods, and services through the marketplace. In other words, you are using a marketplace facilitator if you are selling through Amazon, Etsy, WalMart, etc. Marketplace Facilitator legislation shifts the sales tax collection and remittance obligations from the seller to the marketplace facilitator. According to Amazon’s website, 44 states, and Puerto Rico have enacted marketplace facilitator legislation to date. Marketplace facilitators are responsible to calculate, collect, remit, and refund state sales tax on sales sold by third party sellers in states that have enacted this legislation. Again, there is a “catch.” In some states, local taxes have not been included within the Marketplace Facilitator Legislation. Third party facilitators are not responsible for those local taxes in those states. If you are selling EXCLUSIVELY through a third party facilitator, then no sales tax license may be required. If you sell through a marketplace AND sell from your own website or other platforms, then you will have to obtain the appropriate sales tax licenses and collect and remit sales taxes for any sales not transacted through a marketplace in states where you have nexus. Hosted store services, such as Shopify or Squarespace, offer integrated sales tax rate determination and collection. Mobile point of sale systems, such as Square, use GPS to determine sale location and calculate the appropriate tax rate. These applications collect the taxes, and have reporting capabilities, but they do not actually file the individual sales tax returns.
If you are are selling primarily to Wyoming customers or selling small volumes, then interstate sales tax will probably not be a huge problem. You will have to obtain sales tax licenses and collect and remit sales tax to any jurisdiction where you have physical or economic nexus. At the point where you are selling volume in many different states, you may want to investigate using a service, such as TaxJar, Avalara or Vertex, that can calculate and pay your sales tax for you.
For additional information about Wyoming Sales Tax, visit the Wyoming Department at http://revenue.wyo.gov/Excise-Tax-Division. You can also reach out to your local Wyoming SBDC Network advisor at any time for no-cost, confidential assistance by clicking here.
About the Author: Cindy has been helping Wyoming entrepreneurs start or improve their businesses for the past 17 years. An entrepreneur herself, she thrives on the challenge of understanding each new business and business owner and helping them to succeed. Currently the owner of several rental properties, she has owned a number of other small businesses, including a want ad newspaper, a secretarial service, and a stained glass studio.