Collecting & Filing Sales Tax for Your Business

โSo do I need to worry about collecting & filing sales tax for my business? And if so โ what percentage or amount do I need to charge?โ
Hoo boy โ this is actually a surprisingly complicated question
Hereโs why:
๐๐ฎ๐ฐ๐ต ๐๐๐ฎ๐๐ฒ ๐ถ๐ ๐ฑ๐ถ๐ณ๐ณ๐ฒ๐ฟ๐ฒ๐ป๐
There is no universal federal sales tax rate โ sales tax is determined by each individual state, therefore the rules and rates and filing frequencies differ from state to state.
And itโs not just state taxes โ there are also local taxes (like county and city) to factor in as well.
๐๐น๐น ๐ฝ๐ต๐๐๐ถ๐ฐ๐ฎ๐น ๐น๐ผ๐ฐ๐ฎ๐๐ถ๐ผ๐ป๐ ๐ผ๐ณ ๐๐ผ๐๐ฟ ๐ฏ๐๐๐ถ๐ป๐ฒ๐๐ ๐ฎ๐ฟ๐ฒ ๐ฎ ๐ณ๐ฎ๐ฐ๐๐ผ๐ฟ
What if your business is located in Ohio, but you have a warehouse located in Pennsylvania? Or a salesman located in Illinois? Did you travel to Kentucky to sell your goods at a weekend convention?ย That all has an effect, too.
(And donโt get me started on the confusions and complications of drop-shipping and Amazon Fulfilment)
๐ฆ๐ผ๐บ๐ฒ๐๐ถ๐บ๐ฒ๐ ๐๐ต๐ฒ๐ฟ๐ฒ ๐๐ผ๐ ๐๐ต๐ถ๐ฝ ๐๐ผ ๐ถ๐ ๐ฎ ๐ณ๐ฎ๐ฐ๐๐ผ๐ฟ
While some states require you to collect sales tax based on your business location, most states are โdestination-based. Therefore, you need to factor in the buyerโs ship-to location.
๐ฌ๐ผ๐๐ฟ ๐ฎ๐บ๐ผ๐๐ป๐ ๐ผ๐ณ ๐๐ฎ๐น๐ฒ๐ ๐ฎ๐ณ๐ณ๐ฒ๐ฐ๐๐ ๐๐ต๐ถ๐ ๐ฎ๐ ๐๐ฒ๐น๐น
Depending on the state, if youโre physically located in State A and selling in State B, you donโt need to collect sales tax in State B until you cross a certain sales total minimum (like $100k in sales)
So again – this simple question doesnโt have a simple answer
However, here are a couple of amazing resources to help you figure this out for you and your business:ย
This article from Bench about sales tax basics:
https://bench.co/blog/tax-tips/sales-tax-basics/
This amazing state map tax tool from Taxjar:
https://www.taxjar.com/resources/sales-tax/states
This video walks you through how to set up sales tax in your Quickbooks Online account:
What about you?ย How do you handle sales tax management in your business?ย Iโd love to hear your favorite tricks + tools!
โฆ Or maybe right now youโre thinking, โIโm not even up to date on the BIG things, like client payments โฆ let alone sales tax rates!!โ
No worries โ Weโve got ya covered We help our clients with this kind of stuff, from catch-up services to monthly management, on a daily basis. And weโd love to help you, too! www.chooseabacus.com