Should you collect sales tax in Idaho?
Sales tax is levied on the retail sale of tangible personal property to your customers, which includes leasing or renting tangible property. However, you will collect the sales tax if you determine the nexus in Idaho. Nexus is the presence that may come physically or economically.
A physical nexus is typically created when your business has a store, warehouse, or office location in Idaho. An economic nexus is intertwined when you cross paths with threshold limits as already stipulated by the state. These thresholds are based on revenue.
Let’s explore if your business has a Physical nexus in Idaho.
A physical nexus is integrated when your business is engaged in the following in Idaho:
- Servicing tangible personal property in Idaho.
- Maintaining, occupying, or using a place of business or an office in Idaho.
- Employing or retaining any contractor, including an agent, representative, or salesman, by whatever name called, engaged in activities relating to selling, delivering, installing, or taking business orders.
- We have a stock of goods in Idaho.
You may also refer to the Idaho State Tax Commission advisory to learn more about business activities that may create a physical nexus within the state.
Is it constituting an Economic nexus in Idaho?
You are required to comply and register under sales tax rules if your retail business sales in Idaho exceed $100,000 during the current or previous calendar year.
Further, suppose you are an online seller and executed an affiliate marketing arrangement with Idaho-based retailers to refer customers to your business. You make sales to Idaho customers exceeding $10,000 in the preceding 12 months. In that case, you will create a click-through nexus, which requires collecting and reporting sales tax in the state.
How can you Register for Sales tax in Idaho?
You need to apply online for a sales tax permit in Idaho. Once you apply online for sales tax registration, the permit generally takes ten business days to receive.
Otherwise, you can also submit the licensing application using the IBR-1 form and send it to their mailing address. This process may take about four weeks to process your application.
Additionally, before applying for a new tax account number, make sure you have the following information handy:
- EIN and Social Security numbers of all officers, partners, or owners.
- Address details (physical and mailing).
- Business incorporation dates in Idaho.
- Contact information.
- Employee information.
Click here for more precise information.
Is your product or services liable to Sales tax in Idaho?
Tangible Property: Sales tax in Idaho is imposed primarily on the retail sale of tangible personal property, such as Furniture, giftware, toys, etc.
Services: Although services are not subject to sales tax in Idaho, a few exceptions include service or labor costs leading to the creation of tangible personal property, hotel stays, vehicle rentals, etc.
Digital Product: Idaho charges sales tax on digital products. So, if you sell digital products such as software, streaming services, e-books, etc., you need to collect the sales tax. For more information, visit the official website of Idaho sales tax commission.
SAAS: SAAS is software that allows users to connect to the cloud and use it over an internet connection. It is non-taxable in Idaho as it is considered a digital product. Here is the link of guidance issued by the state on taxability of SaaS (rule 27).
The state provides certain exemptions from the levy of sales tax, such as food for home consumption, prescription drugs, medical products, and aircrafts. To see what exemptions are covered, please click here.
You can read further by visiting the department website to know exactly what’s included in your list of items bound to pay sales tax.
How should you collect and calculate state taxes in Idaho?
Collecting and computing accurate sales tax to be remitted to the state may involve stratospheric efforts, especially when you are not Idaho-based. The sales tax is destination-based in Idaho, which means you must collect taxes on tangible property sold to buyers based in Idaho.
However, there are complexities involved where you have a business nexus even if you are not located in the state. Any default may lead to serious concerns, penalties, or fines by the state. That is what TaxDo is here for you! Our specialized sales tax calculator and professional services will make your job super easy and lighten your compliance burden.
Idaho has a base sales tax rate of 6%, followed by local tax rates that vary by city and municipality.
Below is the simple formula you can use to calculate your sales tax collection on each merchandise sold:
Sales Tax collectible = Sale value * (6% plus local tax rate)
Do you need to collect sales tax on Shipping Charges?
Shipping charges can be delineated separately in the sale invoice raised to the customer or dissipated within the selling price of the items sold. If shipping charges are separately stated on the invoice, there will be no tax applicability; however, you need to collect the tax on the full sales price, including shipping charges, if not stated separately. Visit here for guidance issued by the state.
How should you file sales tax in Idaho?
There are multiple options available to you for reporting your sales tax.
E-file: You can e-file your return using the Idaho TAP (Taxpayer access point) portal.
File by Mail or In-person: Complete form 850 and mail it to their address or submit it in person.
Filing frequencies and due dates
You must file the sales tax monthly, due on the 20th of the following month. However, you will get the quarterly filing status when your sales tax liability is below $750 per quarter. In that case, file your sales tax by the 20th from the end of the relevant quarter.
Additionally, if you are a distributor or wholesaler and have just a few sales, you can request bi-annual or yearly filing. Then, please file your sales tax by 20th July and 20th January if filing semi-annually or by 20th January when filing annually.
Note: If the due date is a holiday or weekend, the next business day would be considered the final due date. Here is the link to Idaho’s official website for filing due dates.
Are there any fines or penalties for default when filing or paying sales tax?
The state levies a penalty of 5% of sales tax due if you default in filing the sales tax by the due date, subject to a maximum of 25%. Also, if you file the return but don’t pay taxes in time, the penalty levied would be 0.5% of the tax due for each month, subject to a maximum of 25%.
However, assigning your tax burden to TaxDo would not result in you paying any penalty or interest. We will adhere to the due dates.
You may visit the Idaho State Tax Commission site for more detailed instructions.