Which States Do Not Collect Online Sales Tax?

Especially after the COVID-19 pandemic, online shopping has grown in popularity as a method of making purchases of both goods and services. With the popularity of internet shopping, the issue of taxing online transactions has arisen. Even if online shops don’t have a physical presence in the state, the United States Supreme Court has already determined that states can nevertheless collect sales tax from them. Not all states, nevertheless, have imposed this tax. Which states don’t collect sales tax online, then?

Currently, Alaska, Delaware, Montana, New Hampshire, and Oregon are the only five states without a statewide sales tax. The fact that some towns in Alaska and Montana might still levy a local sales tax should be noted. Additionally, several states exempt specific purchases like food, clothing, and medication from paying sales tax.

The tax rate differs for the states that do impose sales tax on internet purchases. The state sets the tax rate, which may be 2.9% in Colorado or 7.25% in California. Local taxes are also levied in some states, which can raise the total tax rate. To effectively determine the cost of their purchase, online consumers must be informed of the tax rates in their state and municipality.

Online purchases’ sales tax can be calculated in a few easy steps. Determine your state’s and locality’s tax rates first. The purchase amount should then be multiplied by the tax rate. For instance, the sales tax would be $6 if the transaction price was $100 and the tax rate was 6%. The final step is to calculate the item’s total cost by adding the sales tax to the purchase price.

The buying and selling of goods and services over the internet is referred to as internet sales. Some contend that taxes should not be applied to online firms, while others think they should be taxed the same as traditional brick and mortar stores. Online sales taxes are justified by the claim that they level the playing field between virtual and actual retailers. Revenue from sales taxes can also be used to support critical regional, national, and local initiatives.

In conclusion, Alaska, Delaware, Montana, New Hampshire, and Oregon are the only five states in the union that do not levy a statewide sales tax. Alaska and Montana may still levy municipal sales taxes in select localities, though. The tax rate differs for the states that do levy sales tax on online transactions, and it may be determined by multiplying the cost of the purchase by the tax rate. While some argue against it, others think it’s essential to level the playing field between online and brick-and-mortar merchants and to raise money for vital state and local services and initiatives.