Sales tax is a huge responsibility for new business owners.
Remember that while you handle the day-to-day management of your business, you still have to deal with other issues related to running a successful company… including collecting and paying sales taxes.
This guide is going to cover everything you need to know about sales tax as a new business owner.
What is sales tax?
It’s a required tax on the sale of goods and services.
How much is sales tax?
This depends on what state you’re located in as well as which local jurisdictions (cities, towns, etc.) you do business with. Some states collect statewide sales tax while others have county-level or district-level taxes as well.
What things are taxed?
This is an important question that most new business owners don’t think about until after the tax is applied. Things like food, clothing, and medicine are typically not taxed (maybe with some exceptions).
How to calculate sales tax amount of sales tax
It’s important for any business owner to calculate how much sales tax they owe to avoid penalties and interest fees.
To determine the amount of sales tax you have to pay, multiply your taxable purchase amount by the state’s applicable rate.
Let’s say your taxable purchase is $100 and the rate for that particular state is 10 percent. You would then multiply 100 by 10 for a final figure of $10.
Which states have no sales tax?
There are currently five US states that don’t charge any type of sales tax – Alaska, Delaware, Montana, New Hampshire, and Oregon.
Who pays for sales tax?
The buyer or the seller is responsible for paying the sales tax to the state government.
How to collect and report state and local taxes
You can become a sales tax specialist after learning the basics about collecting and reporting your state and local taxes.
To collect sales tax, you simply request payment from your customer when they make a purchase that’s subject to taxation.
This is more difficult for online businesses since tax rates vary by location. You’ll have to collect from your customers.
How do you collect from international customers?
In countries outside of the United States, collecting sales tax can be a confusing process since rates and rules vary by country. You’ll need to get sales tax support from a business consultant or a tax specialist if you plan on selling products internationally.
However, there are some software solutions available that can help you with this process.
How to report sales tax
You’ll have to file a sales tax return each month, quarter, or year depending on your company’s business cycle. For some states, the amount of sales tax you collect from customers has to be reported as revenue as well as any deductions for returned items and damaged goods.
There are several different methods to choose from when reporting sales tax. You can decide based on the size of your company, whether you do business online or offline, and other factors.
How is sales tax beneficial?
Sales tax is one of the most reliable ways to generate income for states and municipalities.
That’s why it’s so important for companies to follow the rules and regulations about collecting the tax, paying it to the government, and reporting it as part of their revenue.
It’s all a part of running a successful business. Sales tax is something that you’re going to have to comply with from now on… so you might as well learn everything there is to know about it.