Understanding Idaho Sales and Use Taxes
Understanding and complying with the sales tax requirements in the states in which you do business is absolutely essential. More states are taxing services, as well as retail sales, so no business owner can afford to be in the dark. In addition, you may find that you are liable for use taxes for products purchased out of state. This article answers some of the basic questions regarding sales tax in Idaho.
In Idaho, a 6 percent state tax is imposed on retail sales to be collected by the retailer from the consumer. In addition, make sure you contact your local (county, municipal etc.) governments in Idaho because they are allowed to assess a local sales and use tax. These sales taxes are imposed on the consumer, although the retailer is responsible for collecting them.
Included in the taxable items are admission charges and the use of an amusement device operated by coin, currency, or token.
The sales tax does not apply to sales of services except for the following:
- producing property to the special order of the customer
- producing property for consumers who furnish the materials used
- food, meals, and drinks for a consideration
- admission charges and charges to use property or facilities for recreational purposes
- providing hotel and trailer court accommodations
- leasing or renting tangible personal property
- intrastate transportation for hire by air of freight or passengers except as part of a flight by a certified air carrier or an air ambulance service
Leases of tangible personal property are taxable. Receipts from the lease or rental of tangible personal property are taxable. Rentals to be applied on a future sale or purchase are taxable. When ownership passes upon termination of the terms of a lease contract with no additional consideration or an amount below fair market value, the transaction is a sale, and tax on the entire sale price must be collected on the date the leased property is delivered.
Absorbing the Sales Tax Is Illegal
In Idaho it is against the law to refund or offer to refund all or any part of the amount collected, or to absorb the amount of sales tax required to be added to the sales price and collected from the purchaser. As a seller, it is also against the law for you to advertise directly or indirectly that you will absorb the sales tax that is required to be added to the sales price.
Obtaining tax permits in Idaho
In Idaho all persons desiring to engage in business in Idaho as sellers must file an application for a seller's permit. There is no seller's permit fee. If you're the owner of an amusement device you can obtain an annual permit fee for $35, instead of paying the sales tax.
Certain items are tax-exempt. Idaho has many specific items that are exempt from sales tax — for example, certain prescription medications are exempt from Idaho sales tax. You'll want to check and see if you are exempt from the sales tax.
Purchasers May Supply Tax Exemption Certificates
An exemption certificate may be issued by a purchaser of a nontaxable item. The exemption certificate may be based on the type of transaction (such as a resale exemption) or on the item itself.
Purchases Made for Resale Are Not Taxed
In Idaho, purchases of tangible personal property for purposes of resale are not subject to tax. However, all sales are presumed taxable, and the seller has the burden of proving that a sale is not taxable (unless the seller has a resale certificate on file from you, the purchaser).
Resale exemption certificate requirements. Idaho prescribes forms that are for use as resale certificates. As a purchaser, you are allowed to use Form ST-101, Sales Tax Resale or Exemption Certificate, or The Uniform Sales and Use Tax Certificate adopted by the Multistate Tax Commission. In any case, resale certificates must contain the following information:
- the purchaser's (or your agent's) signature
- the purchaser's (or your agent's) name and address
- the number of the permit issued to the purchaser or a statement that the purchaser is an out-of-state retailer
- a description of the general character of the tangible personal property sold or rented by the purchaser in the regular course of business
Blanket resale certificates are permitted. In Idaho, blanket resale certificates are allowed. This means that the purchaser is not required to provide a separate claim form to the seller for each exempt sale. For most exemptions, there is a resale certificate on file with the seller, it covers all exempt sales from that purchaser for the life of the business relationship. Since businesses change hands and the information on these forms can become outdated quickly, it's a good idea for a seller to update the resale and exemption certificate files at least every four years.
Physical Presence Required for Tax Liability to Arise
Idaho has a statute that specifically taxes out-of-state mail order and catalogue sellers. However, you will be responsible for paying this tax only if you have physical presence within Idaho. To determine if you have physical presence, ask yourself the following:
- Do I have retail facilities, a warehouse, or any office space in Idaho? Maintaining retail or warehouse facilities will give you physical presence. Also, having an office for employees, even for business activities unrelated to mail order sales, will give you physical presence.
- Do my employees or I enter Idaho for purposes of taking and transmitting orders from Idaho? If your employee or independent contractor goes into Idaho to take or transmit orders, your business may have physical presence in Idaho. However, contracting with a common carrier to deliver mail order goods does not constitute physical presence.
- Do my delivery vehicles frequently enter Idaho for purposes of delivering property? Frequent deliveries in Idaho by your trucks will give you physical presence in Idaho.
Idaho Permits Use of Sales Tax "Bracket System"
The bracket system may be followed by sellers in computing the sales tax. Sales for a total amount of 11 cents or less are exempt from tax. The tax on each whole dollar is six cents plus an amount for each additional fractional dollar as determined by the scheme in the following chart:
|$0.00 to 0.11 ||no tax |
|0.12 to 0.20 ||$0.01 |
|0.21 to 0.37 ||0.02 |
|0.38 to 0.53 ||0.03 |
|0.54 to 0.70 ||0.04 |
|0.71 to 0.87 ||0.05 |
|0.88 to 1.03 ||0.06 |
Claiming Refund for Excess Tax Payments
Taxes that have been erroneously collected or computed may be credited by the Idaho Tax Commission on any amount due and payable from that person and the balance refunded. A refund claim must be made in writing and must include a detailed statement of the reason that you believe a refund is due. Form TCR, Sales Tax Refund Claim, is available for use in making a refund claim. If you file a sales or use tax return you may claim a refund as a credit against sales or use taxes due. This return must be accompanied by a written refund claim. No credit or refund is allowed unless a claim is filed within three years from the time payment was made.
Idaho Imposes a Use Tax on Out-of-State Purchases
In Idaho, the use tax is imposed on the privilege of storing, using, or consuming within the state tangible personal property that was acquired for storage, use, or other consumption in the state. Use tax applies when property is purchased outside of Idaho or from a retailer not subject to the Commission's jurisdiction and is used, stored, or consumed in Idaho. You will generally be allowed a credit for sales or use tax paid in another state for tangible personal property used in Idaho. The amount of the credit may not exceed the amount of the Idaho tax.
Responsibility for collecting use tax. Persons storing, using, or consuming tangible personal property in Idaho are liable for the use tax, but a retailer engaged in business in Idaho is responsible for collecting the tax from the purchaser.