Sales tax: Another business obligation

Whatever the outcome of the continuing debate over sales and use tax law, three responsibilities are unlikely to change much for business owners who do business in those states that have a sales tax — registration, collection, and payment.

* Registration. Typically you have to file for a certificate from your state department of revenue so you can collect sales tax from customers.

* Collection. As a general rule, you need to collect sales tax on goods (and some services) that you sell in a state where you have a physical presence. Sales you make via the Internet might also be subject to sales tax.

Note: States have been expanding the definition of “physical presence,” and the enhanced meaning may encompass facilities less tangible than a storefront or office.

* Payment. Sales and use tax returns are due monthly, quarterly, semi-annually, or annually, depending on the amount of your sales, how much tax you collect, and the state for which you’re collecting the tax. You may be eligible for an “allowance” to reimburse you for the recordkeeping involved in collecting and remitting the tax.

Remember, if your business is located in a state with sales tax, you’re also required to pay tax on purchases you make for items used in your business. As an example, say you purchase a computer for your office from a retailer in another state and the seller does not collect sales tax. You’re responsible for reporting and paying the tax on the purchase price.

Special rules may apply for sales of inventory and in cases when you provide services combined with materials and supplies. Contact our office if you need to review the requirements that apply to your business.

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