Remember that sales tax rates and laws vary by state. Whether selling a used car, running a dog-breeding company or purchasing a sailboat, it is critical to do your sales tax research before completing a bill of sale.

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Determining Sales Tax for a Bill of Sale

After doing your research about your state sales tax and the goods you are selling, you may come to one of a variety of conclusions. In some states, you are not to charge sales tax. In others, you must do so, or do so only for specific items.

If you sell puppies in Indiana, for example, you would charge sales tax and pay and report the tax to the state. In this case, your bill of sale would itemize the sales tax as a separate charge. If you are selling a puppy for $200 and the sales tax rate in Indiana is 7 percent, you would charge an additional $14 for sales tax, and indicate this amount on the bill of sale.     

Use our bill of sale form to guide you through the process. Be sure to research and understand sales tax laws prior to selling and purchasing goods. Taking these important steps will help keep you in line with the law and put your accounting on track.   

Finding Sales Tax Information

To determine your responsibilities regarding sales tax, check with your local tax agency. In Connecticut, for example, the Department of Revenue Services makes available on its website a list of items that are subject to and exempt from sales tax. If in doubt about your tax obligations, consider consulting an attorney.    

Sales Tax Variations by State

Each state has its own sales tax laws, ranging from no sales tax to more complicated requirements, making it important to call your local government agency or look for the information on your government website. For example, Oregon is among very few states with no general sales tax, meaning you can buy a car or other items tax-free.

In California, sellers and buyers should understand the difference between sales tax and use tax. A used car dealer, for example, is responsible for collecting, reporting and paying sales tax in California. A buyer who makes a purchase outside of California either in person or online may owe the state "use tax" for storing or using the goods in California.    

Exemptions and Changing Tax Laws

Some states offer exemptions on items that fall below a certain dollar amount or fall into special categories. For example, if you are selling bicycle helmets or compact fluorescent lightbulbs in Connecticut, you are not required to collect and pay sales and use taxes. However, it is important to stay on top of these laws by checking with your local government agency, as the laws are subject to change. For example, selling clothing under $50 used to be exempt from sales tax in Connecticut, but as of July 2011 clothing is taxable. 

Consequences of Not Paying Sales Tax

Not paying sales tax may result in fines or even jail time, depending on the seriousness of the offense. For example, in 2009 the Indiana Attorney General's Office filed criminal tax evasion charges against a dog breeder that didn't collect or pay the required sales taxes on the sale of hundreds of dogs and puppies. To stay on the right side of the law, it is important to collect the right amount of sales tax and accurately document it on your bill of sale.
Additional bill of sale resources: 

Get started Start Your Bill of Sale Answer a few questions. We'll take care of the rest.

Get started Start Your Bill of Sale Answer a few questions. We'll take care of the rest.