Sales Tax Glossary: LOST

There are so many acronyms in sales tax. SST, SALT, MFA, LOST, and ITFA are just a few of the many different acronyms you’ll come across when working with sales tax. While you might know a few of them, one that might have stuck out is LOST—because that might be exactly how you’re feeling after struggling with sales tax. LOST stands for local option sales tax, which is a sales tax that a local community or municipality can opt to enact for their own benefits. They vary state to state and also within states themselves and make sales tax all the more complex. Massachusetts, for instance, isn’t a LOST state because doesn’t have local option sales tax.

Across the state you’ll only ever pay 6.25% as sales tax no matter if you’re in the Back Bay or in North Adams. This makes calculating sales tax much simpler than other states where sales tax rates vary from town to town. Louisiana, while you can find it easily on a map, is a LOST state. With the highest local option sales tax in the country in 2013, Louisiana businesses and businesses with nexus in Louisiana need to pay close attention to sales tax calculations. The average local rate in 2013 was 4.87%. What happens to local taxes? Each state that is a LOST state handles their sales tax differently.

Most states only require businesses to file with one entity, typically their Department of Taxation or something similar and the state dispenses the LOST funds accordingly. Other states, however, ask businesses to file with each individual municipality to remit their sales tax along with their state department. And other states have a combined approach where some municipalities’ sales taxes are administered by the state and some are collected separately.

Last year we made a map infographic to help but you always want to check with your state to ensure you’re complying to their rules. Alabama is a notable example of a state that recently changed their methods to make things simpler for businesses with their ONE SPOT system so businesses only need to file in one location instead of hundreds. However, there are still many states where this isn’t the case. Using sales tax filing software that guides you through the process and makes filing a simple click of the button is the best solution for businesses with nexus in states with complicated LOST rules.

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