Your business is finally starting, and you’ve got your products and your website or storefront looking amazing. However, one very important aspect you may have forgotten is sales tax. It’s the responsibility of each business owner to ensure that all state sales tax rules are followed, and that includes filing and paying your state sales taxes monthly, or in some cases, quarterly. If you’re intimidated by the world of sales taxes, there is a ton of support for you available. Make sure though, to keep great records and seek assistance when you’re unsure of what to do. Here are a few tips to help you take the mystery out of the sales tax rules.
The basic information
Sales tax is something everyone doing business must pay. It’s simply a tax imposed by the state and local government that’s paid for by the purchaser of any goods or services. If you’re a small business owner, then you are required to pay it, collect it and ensure it is submitted to the correct place by the correct deadlines. Of course, your tax rates will vary from state to state, so you’ll want to first research your own state to see what you owe.
How sales tax is collected
Most states will require you to have a sales tax permit. The Small Business Administration has some great resources to help you find the right links so you can ensure you’re following the rules. Generally speaking, you’ll be required to file and pay your sales taxes every quarter, but in some cases it is done monthly. You also have to report any tax-exempt sales in addition to the taxable ones, so keeping thorough records is a must.
There are a few things that might be exempt from state taxes, but of course you’ll need to check with your state to be sure. In many cases items that are re-sold are exempt from sales tax, since the government assumes taxes were already paid on that item when it was originally purchased. The same goes for raw materials that might be used to create other goods, as it’s assumed the taxes will be paid when those goods are sold. Lastly, there are many non-profits that are tax exempt, but they must provide the correct paperwork, and it’s up to you to keep track of each sale.
Thanks to e-commerce, it’s easy to do business all over the country, which means you might be responsible for taxes in other states. The basic rule is if your business has a physical presence in that state, then you must collect sales tax. However, if your physical presence is not in that state, or if it’s solely online, then you should be exempt. If you’re still unsure of how to handle sales tax rates in other states, take a look at one of the many shopping cart options available for websites today. Most will help you calculate the sales tax, and you can make sure you’re following all the rules to the letter.
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This article was written by Deborah Flomberg for CBS Small Business Pulse