By: Aaron Holland
Only two things in our lives are certain: death and taxes. One occurs at the end of our lives, and the other occurs throughout our lives wherever there is an exchange of money. Sales and use tax is a specific tax that affects every purchaser, from the middle-aged person buying a new Corvette to the 10-year-old buying a Coke from the local convenience store. All entrepreneurs, especially those selling goods online, need to understand sales and use taxes in the state(s) that they are legally connected to.
Basics of Sales and Use Tax
There are two types of taxes that every purchaser is subject to. Purchasers pay sales tax on certain goods and services when buying products within a state that imposes the tax. On top of that, purchasers may be subject to taxes even when they purchase goods in a jurisdiction that does not charge tax. Specifically, a purchaser may be required to pay a use tax to a taxing state when they use or consume taxable items they obtained from a non-taxing jurisdiction. For example, if a consumer buys manufacturing goods in Delaware (a state without sales tax) and then uses those goods to create a product in Pennsylvania, the consumer owes a use tax. In this situation, the use tax forces the consumer to pay the Pennsylvania Department of Revenue the appropriate amount since they never paid tax on the item in Delaware.
A Link Between States
Sales and use taxes are not federally adopted. Instead, individual states and their local jurisdictions decide whether these taxes will be imposed and collected. Due to the localized nature of these taxes, the United States showcases a variety of tax percentages and collection methods. As examples of the varied tax percentages, Pennsylvania has a flat 6% sales and use tax, with a few local jurisdictions, such as Philadelphia and Alleghany County, adding 1% or 2%, respectively. This percentage varies in other states, for example, California taxes 7%, Maryland taxes 6%, New York taxes 4% with an additional average local sales tax of 4%, Florida taxes 6%, and Oregon taxes 0%.
These tax percentages are important for businesses to know as they must pay sales tax to the state(s) in which they operate. For the traditional brick-and-mortar business, the state in which the business operates is easy to understand. However, determining a legal connection to a state can be more difficult when your business operates online. Typically, creating, selling, or packaging goods in a state forms a legal connection between your business and that state. Notice that a business can form legal connections to multiple states and may, therefore, be required to pay sales tax to all those states. Understanding the states that your business has connections with is especially important if your business (1) has workers that work remotely from different states or (2) utilizes a fulfillment service, such as Amazon, that houses your products and ships them from a different state. Situations like these may make your business responsible for paying sales tax to those states.
Responsibility for the Taxes
The business or individual selling goods or providing services is responsible for the sales and use tax that the taxing state charges. The sales and use tax, as seen when buying a new iPhone, is often passed on to the customer during purchase and tracked by the seller for end-of-the-year tax purposes. For certain small businesses or individuals selling goods in low amounts, not passing the tax on to the customer may be a business decision to keep the cost of your goods low. If you choose this option, you should calculate the sales tax at the end of the year to determine how much you owe your connected states.
Failing to pay owed sales and use tax to your connected states can lead to financial penalties, interest accumulation, and other fees. For example, in Pennsylvania, penalties are assessed for late filings, understating the amount of sales tax owed, and other major understatings in the filing. These penalties can account for excessive amounts levied against a business when the business fails to pay the correct sales and use tax to the state.
Is it Time to Pay?
Businesses can be required to file their sales and use tax reports at different frequencies, depending on the type of business, the goods sold, and the rules of the taxing state. Pennsylvania requires sellers to file monthly, quarterly, or semi-annually. Keeping an eye on the tax timeline is helpful as there may be discounts for filing and paying these taxes early.
There are many exemptions to the requirement to pay sales and use tax to connected states. In many states, an exemption applies to certain items, such as groceries and wearable clothing, freeing those items from sales tax. Purchasers may also be exempt from sales tax. For example, certain manufacturers and non-profit organizations are exempt from paying sales and use taxes. Common resellers of goods are also usually exempt from sales tax upon the purchase, but not the sale of, the goods they resell. Therefore, if your business sells goods to resellers, the sales tax may not apply to those sales. Reviewing the exemptions to the sales and use tax can save your business time and money if you or your purchasers fall into one of the many exemptions states provide.
Final Thoughts for Entrepreneurs
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- Keep track of the sales and use tax your business owes
- Learn what states your business has a legal connection to
- Know those states’ requirements for sales and use tax
- Understand your state’s exemptions and utilize all that may apply
- Receive legal assistance for specific sales and use tax advice
This post has been reproduced and updated with the author’s permission. It was originally authored on February 10, 2022 and can be found here.
At the time of this post, Aaron Holland was a 3L student at Penn State Dickinson Law. He had an interest in all things business law, especially in the assistance of start-up businesses and new entrepreneurs. He previously spent 6 years with the United States Marine Corps as a Military Police Officer.
For many nascent entrepreneurs caught up in the many layers of starting their business, building an intellectual property portfolio is not at the top of their priority list. In light of fundraising capital, navigating the real estate market for the ideal property, and building initial inventory, thinking about intellectual property filings might stay on the back burner. However common this scenario may be, it is a mistake—one of the most critical elements of any business is its name (and subsequent branding!), and ensuring that your preferred name is both available and enforceable should be a main prerogative.
When you think about the marketplace giants that we interact with every day—like Apple, Amazon, and Google—you will notice that their names are concise, unique, and recognizable. Entrepreneurs brainstorming a name for their product or business should try to emulate this blueprint, and not just because it is a smart marketing strategy, but because these names are likely to be more easily trademarked.
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Investing in affordable housing is a necessary step in community development and advancement. The Federal Housing Administration’s (“FHA”) Multifamily Mortgage Insurance program is one of many programs facilitated by the Department of Housing and Urban Development (“HUD”) to secure the advancement of affordable rental housing in the United States. Under the FHA loan program, HUD provides mortgage insurance for loans issued by FHA-approved lenders for the construction, rehabilitation, acquisition, and refinancing of affordable and market-rate multifamily housing. A property must contain five or more rental units to be eligible for the FHA Multifamily Mortgage Insurance Program. FHA Insured properties are not subject to income limits unless the property is operating under an additional state or federal affordable housing program, such as receiving Section 8 subsidies or Low -Income Housing Tax Credits (“LIHTC”).
Under the FHA Multifamily guidelines, the mortgagor (also referred to as the borrower) of any FHA-insured project must be a single asset entity (also referred to as a single purpose entity or “SPE”), meaning that the subject property must be the sole asset of the mortgagor entity. HUD has established entity types that are acceptable forms of SPEs for participation in the FHA Multifamily Mortgage Insurance program, some of which are more popular than others. An investor must weigh the benefits and drawbacks of each entity type to determine which will be best for their real estate investment.
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Choosing (and forming) a mortgagor entity for your multifamily investment property is one of the many steps required to participate in the FHA Multifamily program. Consulting with an attorney to make an informed decision as to which entity type is suitable for your investment is imperative, as the mortgagor’s entity structure and organizational documents will be subject to lengthy due diligence review in the approval process.
As a general rule for business owners, ALWAYS presume that 
The year 2021 will be remembered for many reasons: Kamala Harris became the U.S.’s first female African American Vice-President, Netflix’s Squid Games shocked audiences, Omicron arrived, the January 6 Capitol Riots, and the NFT craze began.
Non-fungible tokens or “NFTs” have attracted the likes of Sotheby’s, Snoop Dog, investors, and small business owners. As of December 2021, Pak’s the Merge is the most expensive NFT sold for $91.8 million. Imagine owning a share of that to jump-start your business venture. But how can you make NFTs work for you?
You sell NFTs by selecting the appropriate marketplace and then funding a crypto wallet to “mint your NFT” to upload it onto the marketplace. You then choose the option to sell and follow the appropriate prompts to list your asset, including listing time, price, the type of sale (if you want to sell shares of your asset), currency accepted, and more. The marketplace will calculate the “gas fees” or transaction fees that compensate blockchain miners who add the NFT code to the blockchain and validate the asset. After the NFT is listed, you must promote it on the marketplace or other platforms, including your website.
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Anthony Francioso, at the time of this post, is a rising third-year student at Penn State Dickinson Law. Anthony is from Hamilton, New Jersey, and a graduate of Dickinson College, where he was a member of the baseball team. He is also an Articles Editor for the Dickinson Law Review.
Small business owners must navigate a complex maze of environmental laws. The Environmental Protection Agency (EPA) has issued a number of regulations to oversee and control the impact businesses have on the environment. While businesses must adhere to the EPA’s environmental regulations, these acts are often complex and difficult to understand. To make matters worse, studies have shown that environmental regulations disproportionately burden small businesses and may impose more stringent requirements on new operations.[1]
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Cameron Crowe, at the time of this post, is a rising 3L at Penn State – Dickinson Law in Carlisle, PA. Before coming to law school he worked for many years as a licensed real estate professional in the Pittsburgh area. His focus in law school has been on corporate and entrepreneurship issues with an aim to work in the business transactions sector of law after graduation. Cameron is also interested in mergers & acquisitions and energy law & policy. He has a passion for public service and recently interned at the YWCA Harrisburg Violence Intervention and Independence Blue Cross in Philadelphia, PA. 
Are you a current small business owner, or in the process of forming a new corporation or LLC? If so, you need to be aware of a new federal reporting requirement, which could affect your small business beginning in January of 2022. In 2020, Congress passed the Anti-Money Laundering Act, which was part of the National Defense Authorization Act for Fiscal Year 2021 (“NDAA”). The NDAA included the Corporate Transparency Act (“CTA”) which became effective on January 1, 2021. However, beginning on January 1, 2022, the CTA will begin being enforced, requiring many small business owners to ensure they are in compliance with its reporting requirements or face criminal and/or civil penalties. The remainder of this article will provide an overview of what the CTA is, who it applies to, and how small business owners can ensure they are in compliance with these new federal reporting guidelines.
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Phil Petrina, at the time of this post, is a rising 3L at Penn State Dickinson Law, a member of the Class of 2022. Phil is the President of the Student Bar Association, on the Moot Court Board, a member of the Business Law Society, and a Pennsylvania Commonwealth Scholar. He is interested in corporate and commercial litigation, business law, and healthcare law. Phil can be contacted at pjp5327@psu.edu.