The holidays are almost here! Although you may not think about sales tax while Christmas shopping, it’s interesting to think about how the rates vary from one place to another. For example, if you were buying a toy here in the Golden State, you’d be charged California sales tax. However, if you purchased it just one state north, in Oregon, where there is no sales tax, you would be exempt from the tax.
In honor of the holidays, I thought it would be fun to take a look at sales tax costs Santa Claus would need to budget for, assuming he bought each gift in state rather than relying on his elves in the North Pole.
Santa Claus’ Sales Tax Costs
For the sake of easy numbers, let’s say Santa is giving every single child the same $10 gift this year. Also, it’s worth noting that we’re looking at just statewide sales tax in this example; many states also have city and county taxes added to purchases, too.
As you can see below, some states like Alaska and Montana don’t have sales tax, although most fall in the 4-6% range. Each state has hundreds of thousands of children (if not millions) in it, so let’s say Santa brings 500,000 $10 toys to each state (a very low estimate). How much would he pay in sales tax?
$13,267,000!
I’ve included the breakdown by state below, but as you can see, states are missing out on a lot of revenue because of Santa’s workshop!
Sales Tax Breakdown by State
States without sales tax = $0
- Alaska
- Delaware
- Montana
- New Hampshire
- Oregon
2.9% sales tax = $145,000
- Colorado
4% sales tax = 200,000 per state ($1,400,000 for all seven)
- Alabama
- Georgia
- Hawaii
- Louisiana
- New York
- South Dakota
- Wyoming
4.23% sales tax = $211,500
- Missouri
4.5% sales tax = $225,000
- Oklahoma
4.75% sales tax = $237,500
- North Carolina
5% sales tax = $250,000 per state ($500,000 for both)
- North Dakota
- Wisconsin
5.13% sales tax = $256,500
- New Mexico
5.3% sales tax = $265,000
- Virginia
5.5% sales tax = $275,000 per state ($550,000 for both)
- Maine
- Nebraska
5.6% sales tax = $280,000
- Arizona
5.75% sales tax = $287,500 per state ($575,000 for both)
- District of Columbia
- Ohio
5.95% sales tax = $297,500
- Utah
6% sales tax = $300,000 per state (3,300,000 for all eleven)
- Florida
- Idaho
- Iowa
- Kentucky
- Maryland
- Michigan
- Pennsylvania
- Puerto Rico
- South Carolina
- Vermont
- West Virginia
6.15% sales tax = $307,500
- Kansas
6.25% sales tax = $312,500 per state ($937,500 for all three)
- Illinois
- Massachusetts
- Texas
6.35% sales tax = $317,500
- Connecticut
6.5% sales tax = $325,000 per state ($650,000 for both)
- Arkansas
- Washington
6.85% sales tax = $342,500
- Nevada
6.88% sales tax = $344,000
- Minnesota
7% sales tax = $350,000 per state (1,750,000 for all five)
- Indiana
- Mississippi
- New Jersey
- Rhode Island
- Tennessee
7.5% sales tax = $375,000
- California
So is Santa Claus subject to collecting sales tax or remitting use tax? Although his operation of delivering gifts lasts only one night, the volume alone likely surpasses the threshold that triggers nexus in most states. In addition, his “independent agents” (or parents) act on behalf of Santa Claus and create a physical presence within each state. Sorry Santa! After your “busy season,” give us a call and we’ll try to get you into compliance. Ho Ho Ho!
Miles Consulting Group, Inc. is a professional service firm in San Jose, California specializing in multi-state tax solutions. Our firm addresses state and local tax issues for our clients, including general state tax consulting, nexus reviews, tax credit and tax incentive maximization, income tax and sales/use tax planning and other special projects, including the new California Competes Tax Credit and the California Manufacturers’ Partial Sales Tax Exemption. To learn more, contact us today at www.MilesConsultingGroup.com.
Photo Credit: stockimages via freedigitalphotos.net
