Idaho Sales and Use Tax Guide: Rates, Nexus Rules, and E-Commerce

Sales and Use Tax Basics in Idaho

Sales Tax

Sales tax in Idaho applies to every retail sale, including the sale, lease, or rental of tangible personal property, that is tangible goods, digital goods, short-term accommodation rentals, and other retail transactions. Retail sellers are liable for collecting and remitting sales tax to the Idaho State Tax Commission. Additionally, nearly every retail seller that sells goods or taxable services is required to have a seller's permit and file a sales and use tax return.

Use Tax

Use tax in Idaho applies to goods used or stored in Idaho when the seller does not charge sales tax. Additionally, the Idaho use tax applies if the consumer purchases goods or taxable services outside of Idaho and does not pay a sales tax of at least 6%. A common situation is when a consumer purchases a tangible good from a seller located outside Idaho and brings the goods into Idaho without paying a 6% sales tax in the state where the seller is located.

Furthermore, if the purchase does not qualify for tax exemption or the goods are used in a manner that no longer qualifies for the initial exemption, use tax is due on the purchased goods.

Idaho Sales and Use Tax Rates

Idaho has a state-wide sales and use tax of 6%. In addition to state sales and use tax, some Idaho municipalities also impose local sales tax, commonly known as local option taxes. Whether local governments will impose these local taxes is decided by the voters in the community, hence the name local option taxes.

Furthermore, local governments with established auditorium districts may impose a local sales tax only for short-term lodging for 30 days or less within their district boundaries.

Tax-Exempt Transactions

Under Idaho sales and use tax legislation, all retail sales are taxable unless specifically exempted by Idaho or federal law. There are several types of exemptions available for specific groups, including individuals, non-profit organizations, schools, governments, and businesses.

New residents, nonresident military personnel, Native American tribal members, and out-of-state buyers may be eligible for exemptions for individuals on vehicles and other goods, provided under specific conditions. The same applies to small sellers earning under USD 5,000 per year, as well as individuals selling personal items occasionally, such as giving or selling vehicles to close family members, or purchasing specific off-highway vehicles, modified recreational vehicles, or medical products.

Regarding businesses, those that resell goods, produce items for sale, engage in construction, logging, or transfer capital assets may qualify for tax exemptions on relevant purchases and equipment. Also, certain medical products and repair labor charges are exempt, provided they are separately stated on invoices.

Nexus Rules in Idaho

There are several types of nexus that retail sellers as taxable persons can establish in Idaho. Regardless of which nexus they establish, they become liable for sales and use tax as soon as the nexus is established. Therefore, taxable persons should carefully consider the rules for each of these nexus to determine whether they are responsible for registering for, collecting, remitting, and reporting these taxes.

Physical Nexus

Retail sellers with physical presence in the state are considered to have established a physical nexus in Idaho. This nexus is established by having an office, warehouse, sales or sample room, or storage place, or by maintaining a stock of goods in the state. Additionally, a physical nexus can be established by renting or leasing property, other than real property, to a customer who uses the property in Idaho or by servicing a tangible good there.

Finally, having a salesman, agent, or representative who comes to Idaho to sell, deliver, install, or take orders, regardless of whether they are employees or live in Idaho or another state, is sufficient to establish a physical nexus in Idaho.

Economic Nexus

Economic nexus rules were introduced in June 2019, and they refer to out-of-state retailers or sellers that do not have a physical presence in the state. Under Idaho's economic nexus rules, if an out-of-state retailer's total sales to local consumers exceed USD 100,000, they are considered retailers engaged in business in Idaho. Consequently, they must register for, collect, and remit sales tax.

Marketplace Nexus

With the introduction of economic nexus rules, the Idaho administration also implemented marketplace facilitator rules, also known as marketplace nexus rules. Following these rules, marketplace facilitators are liable for sales tax once the combined total of their sales in Idaho and their third-party sales, meaning facilitated sales on behalf of marketplace sellers, in Idaho, exceeds USD 100,000 in the current or previous year.

Click-Through Nexus

Idaho is one of a few US states that still have click-through nexus rules in place. Suppose retail sellers do not have physical presence but have an agreement with Idaho retailers to refer customers to their business, and sales to Idaho customers exceed USD 10,000 over the past 12 months. In that case, retail sellers are required to obtain a valid Idaho seller’s permit, collect and report sales tax, and remit it to the state.

Taxable Goods and Services in Idaho

Generally, any sale, lease, or rental of any tangible goods, such as vehicles, boats, equipment, clothing, furniture, and tools, is subject to sales and use tax, unless strictly defined as exempt. Additionally, furnishing meals or drinks, admissions to events or places in Idaho, such as tickets to movies or passes to see an entertainer, and labor for production, fabrication, printing, or imprinting are all subject to sales and use tax. 

Furthermore, sales tax applies to fees charged for the use of a facility or the use of tangible personal property for recreational purposes, such as membership fees to a health center or participation in a recreational sports league. Sales and use tax applies to renting a room for 30 days or less, including personal homes as well as commercial hotels, a banquet room at a hotel, or a campsite.

E-Commerce Framework

Out-of-state retail sellers whose total sales of tangible goods and taxable services to Idaho consumers exceed USD 100,000 in the current or previous calendar year must obtain an Idaho seller’s permit and start collecting and remitting sales tax on all their sales.

However, both out-of-state and Idaho retailers must comply with a special set of rules if they make retail sales exclusively through marketplace facilitators.

Marketplace Rules

Out-of-state retailers that sell tangible goods and services through both their sales channels and marketplace facilitators are liable only for sales tax on their direct-to-consumer sales. In contrast, marketplace facilitators are responsible for collecting and remitting all taxes for the sales they facilitate.

Idaho and out-of-state retailers that only sell goods and services through marketplace facilitators are not liable for collecting and remitting sales tax, provided they obtain written verification from marketplace facilitators of the sales tax they reported. Suppose they do not receive this verification that marketplace facilitators are collecting and remitting sales tax on their behalf. In that case, local and remote retailers must include these taxes on their seller's permit.

Digital Goods and Services

Idaho’s tax rules on computer equipment, software, and data services detail when sales tax applies based on the nature of the product or service. Canned software, also known as prewritten software, is generally taxable if delivered on physical media but not if delivered electronically or via the load-and-leave method. Custom software, meaning that which is developed specifically for a client’s needs, is not taxable regardless of delivery method.

Remotely accessed software and online data storage are treated as non-taxable services. In contrast, digital products, such as music, books, videos, and games, are taxable if the buyer receives a permanent right to use them, but digital subscriptions are not.

Digital Marketplace

Since June 2019, marketplace facilitators have been subject to sales and use tax rules and regulations if their sales or facilitations on behalf of marketplace sellers exceed USD 100,000. For a marketplace to be considered a facilitator, it must operate a platform that enables third-party sellers, such as those operating on the marketplaces, to offer their products. Additionally, platform operators must have contracts with these sellers and receive compensation for the services they provide.

Furthermore, facilitators must provide functions relating to the marketplace seller’s products, such as payment processing, fulfillment, product listing, pricing, order taking, branding, advertising, customer service, or managing returns. 

In addition to facilitating communication between buyers and sellers, facilitators must own or operate the marketplace’s infrastructure or technology, which is a mandatory requirement. They may also provide virtual currency for purchases and engage in related software or research activities that support the marketplace. 

Digital Platform Operator

Marketplace facilitators that exceed USD 100,000 in total combined sales of tangible goods and services must obtain a seller permit and report, collect, and remit sales tax. Additionally, they must obtain a separate permit for any sales by marketplace sellers. Additionally, marketplace sellers must verify to the marketplace that they will report any due taxes on their behalf.

Filing and Payment Requirements in Idaho

Most retail sellers are required to file a monthly tax return by the 20th day of the following month. Taxable persons whose quarterly due taxes do not exceed USD 750 are eligible for quarterly tax return filing and payments. Distributors or wholesalers with only a few sales may file semiannually or annual returns and make tax payments every six months or once per year. Tax returns can be filed electronically through a TAP account or on paper by mail or in person.

Taxable persons must file a return, even if there are no taxes due. Nevertheless, if taxable persons report USD 0 in sales for 12 consecutive months, the Idaho State Tax Commission will cancel the seller's permit.

Penalties for Non-Compliance with Sales and Use Tax Requirements

Taxable persons who file or pay due taxes late are charged interest on the due tax from the original due date until the tax is fully paid. In addition to interest, those who fail to comply with filing and payment frequency and deadlines will also be penalized with a 5% penalty of the tax due per month, up to a maximum of 25%.

Those who file a tax return but do not make a payment of due taxes are fined with a penalty of 0.5% per month, up to a maximum of 25%. Notably, even a one-day delay triggers the full monthly penalty.