Frequently Asked Questions: Sales Tax
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What states are you charging taxes in?
- CTM will collect and remit applicable taxes in states wherein it has a physical or economic presence as determined by the applicable state nexus rules.
- Initially, CTM will be charging applicable taxes for customers with service addresses in the following 7 states: CO, IL, MI, NJ, NC, PA, UT
- We will be adding the following states later this spring: FL, WA, TX
- Additional states will likely be added later this year.
What if my business is based outside of the United States?
- If you consume CTM services outside of the US, you are not subject to state transaction taxes. This determination is based on the service address you have provided for your account.
When is this starting?
- Customers with service addresses in the first 7 states listed above will see a applicable state transaction taxes imposed on their account on April 1st (for March usage) and thereafter on the 1st of each month.
- As additional states are added by CTM, we will send advance notice to impacted customers as to when state transaction taxes will be charged to their account.
Why are you doing this?
- If, per nexus determination, CTM is determined to have economic or physical presence in a state or locality, and it directly sells services to someone located in that state or locality, then CTM is required to collect and remit applicable transaction taxes.
- The Wayfair Supreme Court decision in 2018 has led to a shift in state taxes. Previously, most states only taxed sales by businesses with a physical presence in the state. Now, economic activity in a state (“economic nexus”) can trigger a transaction tax collection obligation. Economic nexus is based entirely on sales revenue, transaction volume, or a combination of both.
Will I get an estimate of what my taxes will be?
- There is no way to provide an accurate tax estimate in advance. The taxes assessed on the CTM products you are using could change monthly depending on varying reasons, such as changes in state or local tax laws where you consume our services and/or changes in applicable tax rates.
- We will be providing a detailed breakout of your taxes in your account billing reports after taxes are calculated and assessed on the 1st of each month.
- Not all of our services are taxable in each state.
- The detailed breakout in your billing reports will show the taxes you paid by product.
- In general, the tax rates in most states for transaction taxes range from 5-14%.
How does CTM know how much to charge?
- Tax laws are frequently changing, so we have chosen to work with a third party vendor that focuses solely on local and state tax calculation. CTM will route all usage data through this service to calculate taxes for which you will be charged each month.
How will I know how much I owe in taxes each month?
- When we begin assessing taxes, you will see a tax summary and an exportable detail sheet in your account billing reports.
- Taxes for the previous month will be assessed on the first day of the following month and deducted from your account balance.
- The first round of states will see a tax charge on April 1st.
How do taxes affect my balance?
- You may wish to review your automatic recharge settings on the billing settings page in your account. Since we will be adding an additional charge for assessed taxes on the first day of the month following the month of taxed usage, you may need to adjust your recharge settings accordingly.
- Please keep in mind that your account will be suspended when your balance reaches zero. It will only be updated to an active state when your account has been funded back to a positive balance.
What if my business is a reseller or is tax exempt?
- If you or your business is 501(c)3 organization, please email your Account ID and your federal or state proof or certification of your 501c3 status to: firstname.lastname@example.org.
- If you are in possession of a state specific reseller tax exemption certificate(s), please email the certificate and your account ID to email@example.com.
- Once your certificate(s) is received, our third party exemption company will verify your certificate(s), request any additional information we may need and update your account accordingly.
- Please note that even if you have a reseller or exemption certificate, you may not be exempt from all taxes in every jurisdiction.
What are transaction taxes?
- Transaction taxes are taxes that states and localities impose on the sale of a products and services. These taxes may be assessed at the state, county and municipal jurisdictional levels and can include sales taxes, excise taxes, communications services taxes, and utility user’s taxes. Each jurisdiction will treat CTM’s products differently, and these jurisdictions will have different regulations on what products and services are subject to various transaction taxes.
How are transaction taxes determined?
- Transaction taxes imposed on CTM’s products and services are dependent on where you consume our products and services, which is determined by your “service address.” We use the billing address that you have provided to us as your default service address unless you provide an alternative address.
- If your billing address is not where you consume CTM products, you can update your service address in your account by going to Billing Settings → Service Address.
- Agencies and their subaccounts on agency billing will all be under the same address because one company is paying CTM in that case. In the case of a subaccount on customer billing, a different address can be entered for that subaccount because that is a different company or person paying CTM.