MLM Executive FAQ: Do I have to pay sales taxes in states with sales tax laws?

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Most companies will be registered to pay sales taxes throughout the country. However, most network marketing companies will only register to do business as a foreign corporation doing business in those states in which they have a physical presence, such as having manufacturing facilities, warehouses, offices, or employees. The corporate laws of most states provide that a company is not “doing business in the state” merely because it sells through independent distributors in that state.

MLM companies with tangible personal property sales register to collect and remit sales and use tax. Services are generally not taxed, but more states are proceeding in this area. Your CPA will be able to track rates, classifications, and applicability, as well as handle registrations. He/she can also advise similarly on a few states that have been more aggressive, such Washington with its business and occupation tax, or Texas and Pennsylvania with their franchise tax.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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