Sales tax is an important tax obligation. You are obligated by the state government or local authorities to collect sales tax from buyers and remit to these authorities at specific periods. However, defining how to collect sales tax, whom to receive from and how to remit to the authorities might prove challenging.
Bearing this in mind, here are ten sales tax facts you should understand to ensure that you do not make any costly mistakes.
Some business owners think because they do not collect sales tax, then they are not obligated to remit sales tax. Whether you sell online, use a physical store, own a little booth or even make sales at the trade fair, you might be required to collect sales tax from your customers.
Once your business has a nexus with a state, it is necessary to collect sales tax. However, you must first register and procure a sales tax permit before doing so. Many states consider it a criminal act to collect sales tax from customers without due registration.
The term nexus may refer to a physical presence in a state, but it is quite more prominent than you think. Once you have an employee, warehouse, inventory, salesperson, affiliate, third party, etc. or anyone who can generate sales in another state, you may have also created a nexus with that state.
States have varying percentages and stipulated fees for sales tax. Therefore, you must have strict knowledge about these amounts especially if you have customers in more than one state. Also, you may find that many individual local areas might have a sales tax rate as well. Therefore, when you charge sales tax, you should ensure that you are charging a total combined sales tax rate for your area.
Many states have different formats regarding products that are taxable. For instance, in Illinois, grocery items may have reduced sales tax while in Pennsylvania, clothing is not taxable. Ensure that you charge the right amount of sales tax on the right products.
When you run an online business, you might have more than one e-commerce payment gateways. It is essential that you charge sales tax to buyers within states where you have sales tax nexus on all platforms.
Sales tax due dates are different for every state and you might be required to file quarterly or once every year depending on the state. Many states charge a penalty even if you are a day late; therefore, it is vital that you keep track of all dates by using an efficient tax filing system.
All States require that you file your sales tax returns even for periods when you made no taxable sales. Failure to file may bring on steep fines.
Most states offer tax-free purchases for products you wish to resell as long as you have a valid reseller’s permit. However, a lot of states have varying rules for this concept. So, when a reseller wishes to purchase your goods, you should make sure all rules are adhered to.
Many states offer sales discounts for up to 1-2% of the sales tax you collected if you remit early or on-time. This is entirely free money, so, do not fail to receive your just rewards.
Understanding and planning your tax payments might prove confusing. When you need help managing your tax returns or resolving your tax problems, give us a call. (212) 320-8191 or send us an email at firstname.lastname@example.org.
Urgent Tax Services
6009 16th Ave,
Brooklyn, NY 11204
Ph. (212) 320-8191
Fax (646) 626-6447