Sales Tax Law and Legal Definition

Sales tax is collected on retail sales as provided under state laws, which vary by state. For purposes of collecting sales tax, a sale includes installment and credit sales and the exchange of properties as well as the sale thereof for money. State laws specify what transactions are exempt from sales tax. Licensing requirements also apply to those who are responsible for remitting sale taxes. State laws also specify where the collected tax proceeds will be applied.

In 1998, the Tax Freedom Act of 1998 became law and imposed a moratorium, or temporary ban, on the imposition of any new taxes on access and e-commerce uses of the Internet. The current moratorium bans the creation of taxes on Internet access and use (i.e. monthly fees paid to America Online, CompuServe, Erol's, or other similar services to access the Internet, email and file downloads), and taxes on sales made over the Internet.