Sales tax 101
Sales tax is a tax paid to a governing body (state or local) on the sale of certain goods and services. Idaho first adopted a general state sales tax in 1965, and since that time, the rate has risen to 6%. On top of the state sales tax, there may be one or more local sales taxes, as well as one or more special district taxes, each of which can range between 0% and 3%. Currently, combined sales tax rates in Idaho range from 6% to 9%, depending on the location of the sale.
As a business owner selling taxable goods or services, you act as an agent of the state of Idaho by collecting tax from purchasers and passing it along to the appropriate tax authority. Sales and use tax in Idaho is administered by the Idaho State Tax Commission (STC).
Any sales tax collected from customers belongs to the state of Idaho, not you. It’s your responsibility to manage the taxes you collect to remain in compliance with state and local laws. Failure to do so can lead to penalties and interest charges.
When you need to collect Idaho sales tax
In Idaho, sales tax is levied on the sale of tangible goods and some services. The tax is collected by the seller and remitted to state tax authorities. The seller acts as a de facto collector.
To help you determine whether you need to collect sales tax in Idaho, start by answering these three questions:
- Do you have nexus in Idaho?
- Are you selling taxable goods or services to Idaho residents?
- Are your buyers required to pay sales tax?
If the answer to all three questions is yes, you’re required to register with the state tax authority, collect the correct amount of sales tax per sale, file returns, and remit to the state.
Failure to collect Idaho sales tax
If you meet the criteria for collecting sales tax and choose not to, you’ll be held responsible for the tax due, plus applicable penalties and interest.
It’s extremely important to set up tax collection at the point of sale — it’s near impossible to collect sales tax from customers after a transaction is complete.
Learn about sales tax automation
Introducing our Sales Tax Automation 101 series. The first installment covers the basics of sales tax automation: what it is and how it can help your business.
Sales tax nexus
The need to collect sales tax in Idaho is predicated on having a significant connection with the state. This is a concept known as nexus. Nexus is a Latin word that means "to bind or tie," and it’s the deciding factor for whether the state has the legal authority to require your business to collect, file, and remit sales tax.
Sales tax nexus in all states used to be limited to physical presence: A state could require a business to register and collect and remit sales tax only if it had a physical presence in the state, such as employees or an office, retail store, or warehouse.
In June 2018, the Supreme Court of the United States overruled the physical presence rule with its decision in South Dakota v. Wayfair, Inc. States are now free to tax businesses based on their economic and virtual connections to the state, or economic nexus.
While physical presence still triggers a sales tax collection obligation in Idaho, it’s now possible for out-of-state sellers to have sales tax nexus with Idaho.
Out-of-state sellers with no physical presence in a state may establish sales tax nexus in the following ways:
Affiliate nexus: Having ties to businesses or affiliates in Idaho, provided the out-of-state retailer exceed at least $100,000 in Idaho sales the previous year. Affiliation includes, but isn’t limited to, the design and development of tangible personal property (goods) sold by the remote retailer, or solicitation of sales of goods on behalf of the retailer.
Click-through nexus: Having an agreement to reward a person(s) in the state for directly or indirectly referring potential purchasers of goods through an internet link, website, or otherwise, provided cumulative gross receipts from sales from such referrals to Idaho buyers exceed $10,000 in the preceding 12 months.
Economic nexus: Having a certain amount of economic activity in the state. For sales made on and after June 1, 2019, a remote seller must register with the state then collect and remit Idaho state sales tax if the remote seller has cumulative gross receipts of more than $100,000 in sales in the state during the current or preceding calendar year. Economic nexus doesn’t apply to local sales tax.
Inventory in the state: Storing property for sale in the state. This includes merchandise owned by Fulfillment by Amazon (FBA) merchants and stored in Idaho in a warehouse owned or operated by Amazon.
Marketplace sales: Making sales through a marketplace. Effective June 1, 2019, marketplace facilitators with more than $100,000 in gross receipts from sales in Idaho are responsible for collecting and remitting state sales tax on behalf of marketplace sellers in Idaho. They are not responsible for collecting or remitting local sales tax.
Trade shows: Attending conventions or trade shows in Idaho. You may be liable for collecting and remitting Idaho use tax on orders taken or sales made during Idaho conventions or trade shows.
If you have sales tax nexus in Idaho, you’re required to register with the Idaho STC and to charge, collect, and remit the appropriate tax to the state.
Sales tax nexus can linger even after a retailer ceases the activities that caused it to be “engaged in business” in the state. This is known as trailing nexus. As of January 2020, Idaho does not have an explicitly defined trailing nexus policy.
Fulfillment by Amazon (FBA)
If you’re an active Amazon seller and you use Fulfillment by Amazon (FBA), you need to know where your inventory is stored and if its presence in a state will trigger nexus. Avalara TrustFile includes an FBA inventory report to help demystify FBA shipping and storage patterns. FBA sellers can also download an Inventory Event Detail Report from Amazon Seller Central to identify inventory stored in Idaho.
If you sell taxable goods to Idaho residents and have inventory stored in the state, you likely have nexus and an obligation to collect and remit tax. To begin to understand your unique nexus obligations, check out our free economic nexus tool or consult with a trusted tax advisor.
Sourcing sales tax in Idaho: which rate to collect
In some states, sales tax rates, rules, and regulations are based on the location of the seller and the origin of the sale (origin-based sourcing). In others, sales tax is based on the location of the buyer and the destination of the sale (destination-based sourcing).
Idaho is a destination-based state. This means you’re responsible for applying the sales tax rate determined by the ship-to address on all taxable sales.
After determining you have sales tax nexus in Idaho, you need to register with the proper state authority and collect, file, and remit sales tax to the state. We get a lot of questions about this and recognize it may be the most difficult hurdle for businesses to overcome. Avalara Licensing can help you obtain your Idaho business license and sales tax registration.
How to register for an Idaho seller's permit
You can register for an Idaho seller’s permit online through the Idaho STC. To apply, you’ll need to provide the Idaho STC with certain information about your business, including but not limited to:
- Business name, address, and contact information
- Federal EIN number
- Date business activities began or will begin
- Projected monthly sales
- Projected monthly taxable sales
- Products to be sold
Cost of registering for an Idaho seller's permit
There is currently no cost to register as a business in Idaho.
Acquiring a registered business
You must register with the Idaho State Tax Commission if you acquire an existing business in Idaho. The state requires all registered businesses to have the current business owner’s name and contact information on file.
Streamlined Sales Tax (SST)
The Streamlined Sales and Use Tax Agreement (SSUTA), or Streamlined Sales Tax (SST), is an effort by multiple states to simplify the administration and cost of sales and use tax for remote sellers. Remote sellers can register in multiple states at the same time through the Streamlined Sales Tax Registration System (SSTRS).
As of January 2020, Idaho is not an SST member state.
Collecting sales tax
Once you've successfully registered to collect Idaho sales tax, you'll need to apply the correct rate to all taxable sales, remit sales tax, file timely returns with the Idaho State Tax Commission, and keep excellent records. Here’s what you need to know to keep everything organized and in check.
How you collect Idaho sales tax is influenced by how you sell your goods:
Brick-and-mortar store: Have a physical store? Brick-and-mortar point-of-sale solutions allow users to set the sales tax rate associated with the store location. New tax groups can then be created to allow for specific product tax rules.
Hosted store: Hosted store solutions like Shopify and Squarespace offer integrated sales tax rate determination and collection. Hosted stores offer sellers a dashboard environment where Idaho sales tax collection can be managed.
Marketplace: Marketplaces like Amazon and Etsy offer integrated sales tax rate determination and collection, usually for a fee. As with hosted stores, you can set things up from your seller dashboard and let your marketplace provider do most of the heavy lifting.
Mobile point of sale: Mobile point-of-sale systems like Square rely on GPS to determine sale location. The appropriate tax rate is then determined and applied to the order. Specific tax rules can be set within the system to allow for specific product tax rules.
Idaho sales tax collection can be automated to make your life much easier. Avalara AvaTax seamlessly integrates with the business systems you already use to deliver sales and use tax calculations in real time.
Some goods are exempt from sales tax under Idaho law. Examples include computer software, prescription medications, and qualified purchases made with food stamps.
We recommend businesses review the laws and rules put forth by the Idaho State Tax Commission to stay up to date on which goods are taxable and which are exempt, and under what conditions.
Some customers are exempt from paying sales tax under Idaho law. Examples include government agencies, some nonprofit organizations, and merchants purchasing goods for resale.
Sellers are required to collect a valid exemption or resale certificate from buyers to validate each exempt transaction.
Misplacing a sales tax exemption/resale certificate
Idaho sales tax exemption and resale certificates are worth far more than the paper they’re written on. If you’re audited and cannot validate an exempt transaction, the Idaho State Tax Commission may hold you responsible for the uncollected sales tax. In some cases, late fees and interest will be applied and can result in large, unexpected bills.
Sales tax holidays
Sales tax holidays exempt specific products from sales and use tax for a limited period, usually a weekend or a week. Approximately 17 states offer sales tax holidays every year.
As of January 2020, however, there are no sales tax holidays in Idaho.
Filing and remittance
You're registered with the Idaho State Tax Commission and you've begun collecting sales tax. Remember, those tax dollars don't belong to you. As an agent of the state of Idaho, your role is that of intermediary to transfer tax dollars from consumers to the tax authorities.
How to file
Once you’ve collected sales tax, you’re required to remit it to the Idaho State Tax Commission by a certain date. The Idaho State Tax Commission will then distribute it appropriately.
Filing an Idaho sales tax return is a two-step process comprised of submitting the required sales data (filing a return) and remitting the collected tax dollars (if any) to the Idaho STC. The filing process forces you to detail your total sales in the state, the amount of sales tax collected, and the location of each sale.
Online filing is generally recommended, but paper returns are acceptable.
The Idaho State Tax Commission will assign you a filing frequency. Typically, this is determined by the size or sales volume of your business. State governments generally ask larger businesses to file more frequently. See the filing due dates section for more information.
Idaho sales tax returns and payments must be remitted at the same time; both have the same due date.
You may file directly with the Idaho STC by visiting their site and entering your transaction data manually. This is a free service, but preparing Idaho sales tax returns can be time-consuming — especially for larger sellers.
Using a third party to file returns
To save time and avoid costly errors, many businesses outsource their sales and use tax filing to an accountant, bookkeeper, or sales tax automation company like Avalara. This is a normal business practice that can save business owners time and help them steer clear of costly mistakes due to inexperience and a lack of deep knowledge about Idaho sales tax code.
Avalara TrustFile provides a quick and easy way to prepare and efile sales tax returns. Users can sign up and use the service to prepare returns for free for a limited time.
Filing when there are no sales
Once you have an Idaho seller's permit, you’re required to file returns at the completion of each assigned collection period regardless of whether any sales tax was collected. When no sales tax was collected, you must file a "zero return.”
Failure to submit a zero return can result in penalties and interest charges.
Closing a business
The Idaho STC requires all businesses to "close their books" by filing a final sales tax return. This also holds true for business owners selling or otherwise transferring ownership of their business.
Timely filing discount
Many states encourage the timely or early filing of sales and use tax returns with a timely filing discount.
As of January 2020, the Idaho STC does not offer sales tax filers a discount.
Filing due dates
It's important to know the due dates associated with the filing frequency assigned to your business by the Idaho State Tax Commission. This way you'll be prepared and can plan accordingly. Failure to file by the assigned date can lead to late fines and interest charges.
The Idaho STC requires all sales tax filing to be completed by the 20th day following the tax period. Below, we've grouped Idaho sales tax filing due dates by filing frequency for your convenience. Due dates falling on a weekend or holiday are adjusted to the following business day.
|Reporting period||Filing deadline|
|January||February 20, 2020
|February||March 20, 2020
|March||April 20, 2020
|April||May 20, 2020
|May||June 22, 2020
|June||July 20, 2020
|July||August 20, 2020
|August||September 21, 2020
|September||October 20, 2020
|October||November 20, 2020
|November||December 21, 2020
|December||January 20, 2021
|Reporting period||Filing deadline|
|Q1 (January 1–March 31)||April 20, 2020
|Q2 (April 1–June 30)||July 20, 2020
|Q3 (July 1–September 30)||October 20, 2020
|Q4 (October 1–December 31)||January 20, 2021
|Reporting period||Filing deadline|
|H1 (January 1–June 30)||July 20, 2020|
|H2 (July 1–December 31)||January 20, 2021|
|Reporting period||Filing deadline|
|January 1–December 31||January 20, 2021|
Filing an Idaho sales tax return late may result in a late filing penalty as well as interest on any outstanding tax due. For more information, refer to our section on penalties and interest.
In the event an Idaho sales tax filing deadline was missed due to circumstances beyond your control (e.g., weather, accident), the Idaho STC may grant you an extension. However, you may be asked to provide evidence supporting your claim.
Penalties and interest
Hopefully you don't need to worry about this section because you're filing and remitting Idaho sales tax on time and without incident. However, in the real world, mistakes happen.
If you miss a sales tax filing deadline, follow the saying, “better late than never,” and file your return as soon as possible. Failure to file returns and remit collected tax on time may result in penalties and interest charges, and the longer you wait to file, the greater the penalty and the greater the interest.
If you’re in the process of acquiring a business, it’s strongly recommended that you contact the Idaho STC and inquire about the current status of the potential acquisition. Once you've purchased the business, you’ll be held responsible for all outstanding Idaho sales and use tax liability.
Shipping and handling
If you’re collecting sales tax from Idaho residents, you’ll need to consider how to handle taxes on shipping and handling charges.
Taxable and exempt shipping charges
Charges for shipping, handling, delivery, freight, and postage included in the price of a taxable sale are generally taxable in Idaho. If the sale is tax exempt, the shipping charges are generally exempt as well. Separately stated charges are usually exempt, regardless of whether the sale itself is taxable, although fees charged for shipping goods to a retailer (inbound transportation) are generally taxable even if separately stated
There are exceptions to almost every rule with sales tax, and the same is true for shipping and handling charges. Specific questions on shipping in Idaho and sales tax should be taken directly to a tax professional familiar with Idaho tax laws.
For additional information, see Idaho Statute 63-3613.