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Sales Tax Bookkeeping Advice for Small Business

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In this weeks Bookkeeping tips article, we discuss the need to sharpen your skills in sales tax. As a seller of taxable products and services, collecting and remitting the correct amount of sales tax is critical. Audits can be brutal, and mistakes can be expensive.

Sales tax is governed by the state, so each state makes their own rules. Sales tax can include state, county, city and special jurisdiction taxes.

You are required to collect sales tax on taxable products from the customer and pay to any state where you have sales tax nexus. Nexus means you are connected to a state (usually your physical location), however other examples like employees, trade shows, and inventory can establish nexus in another state.

Online sales can also cause multiple state tax filing. Depending on the state, e-commerce sales are taxed at the tax rate of their business location (origin-based sourcing) or the customer’s ship to address (destination-based sourcing)

Getting help with you sales tax questions

States can require sales tax if you sold to customers in their state. Learn the rules by going online to the state’s Dept of Revenue.

On the website, register for a Sales Tax Permit in your nexus state. The state will assign your filing due date and send notices of changes. The website is a great source to answer sales tax questions of who, what, when and where.

  • Who: remit all tax collected to the state or does the city collect their own tax?
  • What: should you tax labor and shipping?
  • When: how often do you file?
  • Where: file online or a paper return?

Sales tax rates are location specific, so use the address lookup feature when available.

File a return even if you don’t have sales to report. Be sure to remit the correct amount of tax owed even if you didn’t collect from the customer. Frequently checking for tax changes is always a good idea.

Bookkeeping near me

If you need further help with sales taxes and need a referral please let us know. Although we do not specialize in sales taxes, we can refer you to a partner that we work with. As a provider of accounting and bookkeeping services we build strong work relationships with tax professionals.  If you have any other questions or need help with your accounting practices, please contact us for a consultation.

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Topics: Business Advice Bookkeeping