A nexus is generally defined as a physical presence, but this "presence" is not limited to having an office or a warehouse; having an employee in a state can constitute a nexus, as can having an affiliate , such as a partner website that directs traffic to your business' page in exchange for a share of profits.
This scenario is an example of the tensions between ecommerce and sales taxes. For example, New York has passed "Amazon laws" requiring internet retailers such as Amazon. AMZN to pay sales taxes despite their lack of physical presence in the state. In general, sales taxes take a percentage of the price of goods sold. At the same time, some products carry special taxes, known as excise taxes. The U. In most of the developed world, value-added tax VAT schemes have been adopted.
In the fuzzy sock example above, the yarn maker would pay a percentage of the difference between what they charge for yarn and what they pay for wool; similarly, the garment maker would pay the same percentage on the difference between what they charge for socks and what they pay for yarn. Put differently; this is a tax on the company's gross margins , rather than just the end user. The main objective of incorporating the VAT is to eliminate tax on tax i.
This would translate to a higher amount of total taxes paid, which is carried down to the end consumer in the form of higher costs for goods and services. Congressional Research Service. Accessed Dec.
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This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. Review our cookies information for more details. Excise taxes are considered an indirect form of taxation because the government does not directly apply the tax. An intermediary, either the producer or merchant, is charged and then must pay the tax to the government. These taxes can be categorized in two ways:. An excise duty is also known as excise, excise tax, or even a duty of excise special tax.
It is an inland tax on the sale, or production for sale, of specific goods within the country. It states that the product that is produced with the intention of selling within the country can be levied an excise duty.
However, goods produced with the intention of exporting may be exempt from this tax. An excise is considered an indirect tax which means that the producer or seller who pays the tax to the government is expected to try to recover or shift the tax by raising the price paid by the buyer.
Excise duties are usually applied on gasoline and other fuels, tobacco and alcohol, etc. Sales tax applies to goods and services we purchase every day. Books, furniture, dry cleaning, movie tickets, etc. Essentials are often exempt from sales tax. Rent, utilities, groceries, etc. The sales tax rate is determined by state and local governments.
The rate might change depending on the good or service. There are three main differences between sales tax and excise tax. The cost of excise taxes is usually factored into the cost of the product. Of course, there are always exceptions. State excise taxes are typically filed monthly. The due dates vary by jurisdiction and the type of return being filed.
Completing that process repeatedly for thousands of transactions can be time-consuming and error prone. Not to mention the complex rules that are applied to determine if a product is taxable in a jurisdiction and determine the correct product category. Excise tax determination software helps ease the process. Filing excise taxes is complicated.
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