Knowing how you need to pay taxes for a small business can be a bit complicated, especially with the changing world of the sales tax rules, which will lead to big trouble. If your business is small and if you don’t like to spend time on knowing too much details on tax related things, then it’s always better to outsource things to companies like TaxConnex who can help businesses to file sales tax properly and efficiently.
Knowing the rules of the sales tax, avoiding stumbling blocks, or finding the comprehensive tax option that will help you go ahead, can bring continued success & growth, doesn’t matter what type of business you run.
Determine if the product and service require sales tax.
The state laws differ significantly in the terms of which goods or services are liable for sales taxes. Suppose you sell just in Delaware, Alaska, New Hampshire, Montana, and Oregon, you don’t need to pay any statewide taxes, although Alaska & Montana allow the localities to charge the sales tax.
Normally, retail items such as handbags or clothes will be subject to sales taxes. Prescription drugs or food items generally are exempt from the sales taxes, though rules differ from one state to another. Things get highly complicated when you sell items on the internet and digital items.
Suppose you are selling the taxable product and service, you should pay sales tax at any state where the business has the “tax nexus.” For instance, you may establish the nexus just by operating the physical store in a state, employing individuals in the state, and exceeding the sales volume in the state.
Know Your Requirement for Collecting Sales Taxes in States
Your business requirement to collect the sales taxes from the customers depends on various factors:
- If products and services that you sell will be taxable in the state
- Suppose you are selling online, then you will have to look up specific needs for collecting the sales taxes as the online seller in every state.
- If you’re the taxable entity (tax nexus) in the state
Ensure you are collecting correctly
When you expand the business online you will start selling on various other shopping carts & marketplaces. Take a little time to check that you’re collecting tax in your nexus states over your shopping carts & marketplaces.
Automate tax filing and reporting
Filing and collecting sales tax will not help the business grow. It is like an obligation. Suppose you spend plenty of time in filing and reporting state tax rather than growing the business, it will be the right time to automate the sales tax compliance.
Who Will Be Responsible for Tax –Seller or Buyer?
Whereas the customer pays sales tax for goods or services bought, it’s a seller who is liable for collecting & paying taxes to their authorities. Throughout the US, there’re many different kinds of sales tax in use. The difference between is who will be the primary taxpayer –a seller or a purchaser. In a few states, sales tax will be imposed on the sellers and who pass this on to the customers
Besides, some states impose taxes on a purchaser with the seller being totally responsible for collecting this tax & remitting it to the state.
Collecting the Sales Taxes for Internet Sales
Suppose you are running an online business, including the online auction business, you will be thinking if you should collect tax for the online transactions. We will answer it in two parts:
- You should charge the sales tax when you are selling online to the customers located in your state. It has not changed.
- The state might need you to charge the sales tax to the customers outside the state (sales online).
As per the current ruling that puts individual states totally in charge of the online sales to the customers located outside a particular state. This decision increased the ability of the states to need online sellers who sold the “good quantity” of the business within a state to charge the sales tax & pay taxes to their state.
Suppose you have the sales tax obligation and have not reported the sales tax, it is just a matter of time before paying what you actually owe. Suppose you continue disregarding the collection & remittance, then you may run a risk of getting audited by the state. If you are an online seller, then you will have to report & pay the sales taxes to the remote states.