Most U.S. shoppers are subject to some type of sales tax. With 45 states and more than 7,000 local government agencies collecting sales and use taxes, business owners need to be sure they understand their obligations. Rates start at a combined low of 4.35 percent in Hawaii and rise to a combined high of 13.725 percent in Tuba City, Arizona, according to 2011 figures from the Tax Foundation. It is the seller's responsibility remit the required sales tax to the appropriate agency.
Establishments with a physical presence engaged in retail business -- including restaurants, hotels and hair salons -- are required in most states to collect and pay local and state taxes on retail goods. This tax is the most straightforward of all, requiring the seller to tack on the appropriate charge based on a percentage of the sale and to remit payment of all taxes collected at
the end of the month, quarter or year, as required by the state. The rate of the tax is based on the physical location of the business. Most states exempt prescription drugs, food, animal feed and raw materials used in the wholesale production of goods.
The rules for service providers can get complicated, but most states consider services or “labor” to be tax exempt. For example, in the state of Colorado, lawyers, certified public accountants and hair salons do not charge sales tax for their services. However, if products are sold, such as shampoo in a salon, the item must be listed separately and taxed accordingly. In the state of Arizona, contractors base their sales tax on the city or town where the project is occurring and not where their business is actually located. Supplies purchased to complete a job, such as lumber and paint, may be exempt from sales tax.