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I receive custom orders and pay sales commissions. Do I have to pay sales tax?

Full Question: I have a limited liability company based in my home in Washington. I paint specially ordered wildlife painting. The whole thing started through word of mouth from friends in the area. Most of sales ship within the state of Washington. Recently I have started taking painting commission from several fishing lodges (in Montana and Colorado) who happened to have bought my paintings and displayed them in the lodges. I have also started to give commission to people who worked in the lodges on order they referred. Do I have to pay sales taxes in those states (Montana and Colorado) if the orders are shipped to an address in Montana?

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Answer:

Diane Yetter photoPlease keep in mind that it is very fact specific and the information provided here is based on the limited facts you have provided. The determination as to whether a company needs to collect sales tax is based on whether they have established a physical presence in the state of delivery. This physical presence can be a permanent location such as your home location in Washington. However, it can also be established through a temporary presence such as if you were to visit on a regular basis to call on customers or prospects or perform services. In addition, if you use local people as your agent to make sales, they could be deemed your representative and create the presence on your behalf. Paying commissions to people in the lodges that make referrals could create this presence for you. The good news is that Montana does not currently impose a sales tax so you don't have to worry about that state. However, depending on the extent of your activities in CO, you may have to get registered and collect tax there.

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