With the modern day times of internet it is now common place for businesses to be able to generate sales from different states and all over the world and with this trend comes confusion for many small businesses around the many statutory tax laws.
It is important to understand and implement systems that will monitor all of these rules and ensure that your business is collecting and remitting the correct tax in the right jurisdiction at the right times.
Determining Sales Tax Liability
While many businesses may heard of Nexus (the connection between your business and the taxing jurisdiction) and have a brief understanding of it, not many people are aware that there are often big changes happening all the time. This has a huge impact on businesses that are remote sellers.
You will need to assess where you have sales tax Nexus and ensure that you are up to date with all the current rule changes. It is also essential to ensure that your business is registered in required states.
Avoid any action that puts you at risk of a sales tax audit. Make sure your rates and dates are not out of date.
Pay Attention To Consumer Use Tax
Use tax is tax that is for use on tangible personal property that is not subject to sales tax. This applies when the purchaser owes use tax on taxable items purchased when they paid no sales tax or paid less sales tax than the sales tax rate.
The responsibility of remittance lies with the the buyer. In certain cases the purchaser would be a business that buys items online or outside the state to use as tangle personal property. It is important to note that use tax also needs to be paid when a business withdraws inventory its inventory for its own use if there was no sales tax paid at the time of purchase.
The business needs to take responsibility of assessing when use tax is accrued and to remit this on a tax return and pay the the tax authority.
You will need to create a written use tax policy and avoid any practices that may increase your risk of an audit, such as failure to assess and accrue consumer use tax, using inventory that was purchased for resale for the use of your company without remittance of sales tax to the vendor or use tax to the tax authority.
Know When, How and Where To Remit Your Sales Tax and Use Tax
Keeping track of your sales tax and use tax can be a trying task. It is important to know which forms you need to use, where to file your returns, when returns are due and what you need to include in your returns.
Create a filing schedule for all of your returns ensure that you are up to date with new filing laws in each state.
Get External Help
If you have a small business and you would rather focus on day to day business activities, complying with your sales tax law and use tax obligations may be an arduous task.
Making use of a tax professional is a fantastic option for your business.