This chapter contains these topics:
The United States has one primary type of tax, a sales tax. You calculate sales taxes on the gross sales price of the goods.
Companies in the United States are generally classified as either taxable or tax exempt.
Manufacturers, wholesalers, retailers, and customers that are end users (who buy goods for their own use) pay sales taxes. Taxes are paid at the time the goods are bought (at the point of sale).
For example, companies must pay sales tax when they purchase computer equipment for their employees. Customers must pay sales tax to book stores when they purchase books.
Manufacturers, wholesalers, retailers, and customers that buy goods for resale (are not the end users of the goods) do not pay sales taxes. These companies obtain a tax exempt certificate.
For example, mills that buy logs to convert to paper do not pay a sales tax. Neither do the companies that buy the paper for printing books pay a sales tax. The companies are not the end users of the products.
When a company is the end user, it must pay all the sales taxes due. For example, in Denver, Colorado, a company must pay the state sales tax and also the Denver city sales tax. The remitter of the taxes can vary, however. Sales taxes can be remitted to the tax authorities by either the seller or the buyer.
In most cases, the seller of the goods and services calculates and remits sales taxes to the appropriate tax authority.
In a few cases, the buyer of the goods and services calculates and remits the sales tax. The sales tax is then called a "use tax".
One example of a use tax is when a company keeps the goods it has manufactured and does not sell them. A company that manufactures pencils, for example, owes use tax when it keeps the pencils for the use of its own employees.