WHICH GOODS AND SERVICES ARE TAXABLE?
Determining whether or not the products or services your company sells are taxable in Idaho is the first step in sales tax compliance.
Traditional Goods or Services
Goods that are subject to sales tax in Idaho include physical property, like furniture, home appliances, and motor vehicles.
Medicine and gasoline are both tax-exempt.
Some services in Idaho are subject to sales tax. For a detailed list of taxable services, view this page from the Idaho State Tax Division.
Digital Goods or Services
A digital good or service is anything electronically delivered, such as an album downloaded from iTunes or a film purchased from Amazon.
Idaho requires businesses to collect sales tax on the sale of digital goods or if the product is being purchased and the rights of the goods are transferred to the customer.
HOW TO REGISTER FOR IDAHO SALES TAX
If you determined that you need to charge sales tax on some or all of the goods and services your business sells, your next step is to register for a seller's permit. This allows your business to collect sales tax on behalf of your local and state governments.
In order to register, you will need the following information:
- Personal identification information (Name, SSN, etc.)
- Business identification information (Business Name, Owner(s), Address, Date of Incorporation, EIN, etc.)
- Business entity type
- Purpose for applying
- Date you’ll begin collecting sales tax in Idaho
Save Money with a Resale Certificate
With a resale certificate, also known as a reseller's permit, your business does not have to pay sales tax when purchasing goods for resale.
COLLECTING SALES TAX
After getting your seller's permit and launching your business, you will need to determine how much sales tax you need to charge different customers. To avoid fines and the risk of costly audits, it's important for business owners to collect the correct rate of sales tax.
When calculating sales tax, you'll need to consider the following kinds of sales:
- Store Sales
- Shipping In-State
- Out-of-State Sales
For traditional business owners selling goods or services on-site, calculating sales tax is easy: all sales are taxed at the rate based on the location of the store.
Here's an example of what this scenario looks like:
Mary owns and manages a bookstore in Stanley, Idaho. Since books are taxable in the state of Idaho, Mary charges her customers a flat-rate sales tax of 8.5% on all sales. This includes Idaho’s state sales tax rate of 6.0% and Stanley’s city tax rate of 2.5%.
The state of Idaho follows what is known as a destination-based.
Consider the following example:
Steve runs his own business selling electronics on eBay out of his home in Boise, Idaho. A customer living in Sun Valley, Idaho finds Steve’s eBay page and purchases a $350 pair of headphones. When calculating the sales tax for this purchase, Steve applies the 6.0% state tax rate for Idaho plus 3.0% for Sun Valley’s city tax rate. At a total sales tax rate of 9.0%, the total cost is $281.50 ($31.50 sales tax).
Idaho businesses only need to pay sales tax on out-of-state sales if they have nexus in other states. Nexus means that the business has a physical presence in another state.
Common types of nexus include:
- A physical location, such as an office, store, or warehouse
- An employee who works remotely or who is a traveling sales representative
- A marketing affiliate
- Drop-shipping from a third party seller.
- A temporary physical location, including festival and fair booths.
FILE YOUR SALES TAX RETURN
Now that you’ve registered for your Idaho seller's permit and know how to charge the right amount of sales tax to all of your customers, you are all set to file your sales tax return. Just be sure to keep up with all filing deadlines to avoid penalties and fines.
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How to File
Idaho requires businesses to file sales tax returns and submit sales tax payments online.
How Often Should You File?
How often you need to file depends upon the total amount of sales tax your business collects.
- Annual filing: If your business has seasonal activities, such as booths operated during repeating fairs or a Tree Company for Christmas trees may elect to file returns on an annual basis.
- Quarterly filing: If your business collects less than $187.50 in sales tax per month then your business should elect to file returns on a quarterly basis.
- Monthly filing: If your business collects more than $187.50 in sales tax per month then your business should file returns on a monthly basis unless being assigned a different filing period by the Idaho state tax commission.
All Idaho sales tax return deadlines fall on the 20th day of the month, unless it is a weekend or federal holiday, in which case the deadline is moved back to the next business day. Below is a list of this year’s filing deadlines:
Annual filing: January 20, 2020
- First Half (Jan. - June): July 20
- Second Half (July - Dec.): January 22
- Q1 (Jan. - Mar.): April 20
- Q2 (April - June): July 20
- Q3 (July - Sept.): October 22
- Q4 (Oct. - Dec.): January 22
Monthly filing: The 20th of the following month, or the next business day, e.g. April 20 for the month of March, or May 22 for the month of April.
For a complete list of deadlines, check out the Tax Filing Calendar on the Idaho State Tax Commission website.
Penalties for Late Filing
Idaho charges a late filing penalty of 5% per month or partial month up to a maximum of 25% of the tax that is reported on the tax return. The minimum value a penalty can be is $10.00.
The state assesses the unpaid tax with an interest rate of 3% per year or 0.25% per month or partial month for any unpaid tax or penalty.