If you don’t have nexus and don’t charge sales tax, are you liable if the customer does not pay the tax?
If you are a retailer and have not established nexus in a state, you are not required to collect and remit sales tax on sales in that state. For more information on nexus, visit our What is Nexus? FAQ.
If the retailer does not collect sales tax, the purchaser has the obligation to pay use tax directly to the state where the property is used as long as the item is taxable. It is the purchaser’s responsibility to self-accrue and remit the use tax due on the purchase.
There is no sales tax obligation for the retailer if it has not established nexus in a state. However, if a retailer does collect sales tax in a state in which it is not registered to do so, that constitutes an illegal activity. Do not collect sales tax for sales in states where you have not registered to collect sales tax or established nexus.
Retailers should also be aware of expanding nexus rules. Many states have passed legislation that expands the definition of what constitutes nexus for sales tax purposes in that state. As a retailer, you should be aware of new sales tax laws that might result in you having nexus in that state. If you have established nexus in a state, you must register to collect and remit sales tax on taxable sales within that state. If a company has nexus and it did not collect the tax on the sale, then it can be held liable for the tax unless it can prove the sale was not subject to tax or that the customer paid the use tax.
A few states have passed notice and reporting requirements legislation, which are responsibilities you might have if you make sales into a state but don’t meet any nexus requirements. Notice and reporting requirements say that you cannot advertise, promote, or otherwise communicate that no tax is due simply because you do not have nexus in the state. On every invoice, you must put a statement that tells the customer that you didn’t collect tax because you don’t have nexus but that they owe use tax to the state. At the end of the year, you must send every customer a statement of purchase totals and remind them of their use tax obligation. You are also required to send a list of your customers and purchase totals to the state, so the state can better ensure use tax collection. To see which states have enacted notice and reporting requirements, visit our Remote Seller Nexus Chart.
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