Sales tax tips for small businesses

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Sales tax tips for small businesses

Sales tax is one of the administrative issues you will have to deal with as a small business owner. This is because understanding sales tax compliance can be complicated.

Therefore, to help you understand your sales tax needs, here are twelve small business sales tax tips for you. Each tip will help you protect your business from tax problems.

Sales tax tips for small businesses

1.    Pre-Payment

Some states and jurisdictions may require that you make prepayments for more substantial tax amounts. Also, some prepayments may require a different filing schedule than the regular sales tax returns. It is therefore vital that you find out if you are required to make prepayments and its filling schedule. Then, adjust your tax returns schedule to cover these necessities precisely.

2.    Nexus

It is crucial that you determine your nexus within the various states across the country. This is especially important if you are an e-commerce business or have customers, employees, agents, storage units and sales representatives in other states. If any of these events apply to you, you may have a nexus in those states.

When you do, review the laws in those states and calculate, file, and remit sales tax accordingly.

3. Mandatory E-Filing

Some states have different payment methods made available for sales tax filing. Some might require that you file sales tax for larger goods and services electronically. However, many others do not support e-payments. Therefore, review each state and the payment options available to you.

4. Sales Tax Payable

Ensure that you reconcile your sales tax payable account accurately with your financial records before filling.

5.  Make proper checks

Ensure that all checks you have issued to the Department of Revenue have cleared the bank. This might seem unnecessary, but a misplaced notice from either the DOR or the bank may mean an outstanding sales tax payment.

6. Filing Frequencies

An excellent strategy to take care of your tax filings would be utilizing an updated tax calendar feature. From time to time, check to see if you have created nexus in new states, then do your reviews and update your calendar accordingly. Also, some states may change filing frequencies and schedules from time to time, so review this information accordingly.

7. Product Tax-ability

When you have a new product in your business, ensure you understand the tax-ability of its offerings before you make sales in areas where you have a nexus. Certain products may be taxable in a different state and exempt from sales tax in another.

8. Exemptions

Always ensure you have checked all customers’ tax-exempt status as well as their certificate before making sales to such customers. This also includes your re-sellers permit. Review your exemption certificates from time to time and replace expired certificates accordingly.

Also, if you changed your company name or acquired a new business, you may require new exemption certificates from your customers. However, this rule is different for different states and jurisdiction.

9. Take Care of Any Notices

If you have filed and paid your sales tax in prompt order but received a notice in error from your tax authorities, you must attend to this immediately. When you fail to respond timely to such notices, it may cause a levy, lien or even suspension of your business license. In such events, resolving these issues may take quite a while. So, it is essential that you attend to such errors as soon you see the notices before the authorities take any measures that might impact your business adversely.

10. Zip Codes and Jurisdictions

When determining your exact business nexus, do this by using exact location and not ZIP codes. ZIP codes might be accurate sometimes, but they might have your jurisdiction wrong. Business sales tax rates are made of many layers of taxes: state, county, city, local and individual district taxes.

The number paid on each individual item actually means the combination of each of these tax rates. Every jurisdiction might have different criteria and addresses might vary differently.  ZIP codes may not designate specific cities or tax regions and using them might be indeed risky. Therefore, ensure you pinpoint the exact location by latitude and longitude and then make your sales tax calculations accordingly.

11. Documentation & Audits

Ensure that your financial sales records are all balanced and accurate; doing otherwise might hurt you if there is an avenue of a Sales tax audit.

12. Consider seeking professional help

Sales tax might prove daunting to interpret. Therefore, when in doubt about any section, do not fail to seek expert advice before deciding. By doing this, you minimize the risk of audits, penalties and many more consequences that may arise through sensitive decisions.

Let us help you set up an efficient tax system, contact us today (212) 320-8191 or by email at

Urgent Tax Services

6009 16th Ave,

Brooklyn, NY 11204

Ph. (212) 320-8191

Fax (646) 626-6447



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