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.
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Becky started Small Biz Survival in 2006 to share rural business and community building stories and ideas with other small town business people. She and her husband have a small cattle ranch and are lifelong entrepreneurs. Becky is an international speaker on small business and rural topics.
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.