Whether you’re a new startup or an established business, sales tax can be a daunting prospect for many business owners. So, here we’ll explore everything you need to know about sales taxes.
Do You Need to Charge Sales Tax?
Many new business owners assume that their enterprise is too small to need to charge sales tax. Unfortunately, this is not necessarily the case. If your products and services are subject to sales tax in the state where you operate, you are obliged to collect and pay sales tax to the state. You’ll need to do a little research on whether your products and services are subject to sales tax in the state where you do your business.
Does Sales Tax Apply to Internet Transactions?
If you sell online to customers in your home state, you must charge sales tax. Additionally, if you have a sales “presence” in other states, you also need to charge sales tax. You should be aware that the laws relating to internet sales are continually changing as more states try to increase revenue by establishing the concept of businesses having a “presence” in different states.
Registering With Your State Taxing Authority
You will need to register with your state taxing authority. Most states allow set up of payments online. Make sure that you have the necessary information to complete your sales tax registration form. These details will vary according to the state, so be aware you may need to access additional paperwork. The process of collecting, reporting and paying your sales tax will differ according to your state, but there will be links to resources when you register.
Home Businesses
Many business owners assume that since they are operating from home, their business sales are not taxable. This is a potentially costly mistake. If the products and services are subject to sales tax, you must obtain a seller’s permit and ensure that you collect, report and pay sales tax.
Out of State Sales
If you sell out of state, the sales tax situation can become complicated. There are myriad circumstances that need to be considered if you have a presence or nexus in other states. If you are selling out of state, you are likely to benefit from professional tax advice.
Local Option Taxes
Many states allow localities to impose an additional “local option” tax on top of the state general sales taxes. These local option taxes are usually for specific purposes such as flood recovery, or school funding. So, if you sell to customers in different localities, you need to understand the local option taxes for every locality of your customers. The tax rates for different states and localities within these states are subject to change, so you’ll need to research the rates by zip code.
Sales Tax Holidays
Many states have sales tax holidays that provide a few days each year, set aside to allow customers to buy items without paying sales tax. These “holidays” are beneficial for merchants selling certain items, and for customers to get a great deal. If you are selling qualifying items within your state, it is worth investigating when the tax holidays occur during the year, so you can plan your marketing accordingly.