The Most Common Mistakes People Make With Their Sales Tax
Sales tax is a tax imposed on the sale of goods and services. The tax is calculated as a percentage of the sale price of the good or service. The tax is typically imposed by the state where the sale occurs.
Business owners are responsible for collecting sales tax from their customers and remitting the taxes to the state. This can be a complex process, as different states have different sales tax rates and rules. Failure to properly collect and remit sales tax can result in significant penalties. As a result, it is important for business owners to understand the requirements for collecting and remitting sales tax in their state.
1. Assuming That a Product Isn't Subject to Tax
Different states have different laws regarding sales tax, so a product that is nontaxable in one state may be taxable in another. It's important to be aware of the laws in each state where you are making sales, as you may be required to collect sales tax from your customers.
2. Assuming That a Selling Platform Is Collecting Tax for You
Some businesses use online selling platforms in order to manage their sales. These platforms can make it easier to do business, but it is important to ensure that the platform you use will take care of sales tax collection and remittance. You should look into whether the platform is just a sales platform or if it is a marketplace facilitator. Generally, marketplace facilitators are required to collect and remit sales tax on behalf of the sellers that use their platform. However, if the platform is not a marketplace facilitator, then the seller is responsible for this.
If you use an online platform that is not a marketplace facilitator, you are responsible for filing and remitting all of the tax collected. Be sure to understand your sales tax obligations on every platform before you start making sales.
3. Assuming That Sales Tax Is Just like Any Other Taxes
Sales tax is a tax that is levied on the sale of goods and services. The frequency of sales tax return filings depends on the number of sales made and in which states the sales were made. Their returns can be filed at different time sets and due dates, depending on the state's rules for filing frequency. The amount of sales tax that is collected varies from state to state. To avoid late fees and interest, it is important to file your sales tax return on time.
Sales tax is a tax that is levied on the sale of goods and services. The frequency of sales tax return filings depends on the amount of sales made and in which states the sales were made.
4. Using a Third-Party Fulfillment Service
If you use a third-party fulfillment service, you may have to collect sales tax. This is because your product is being stored in the state, even if you do not have economic nexus. You can avoid collecting sales tax by staying aware of where the fulfillment service stores your products.
5. Turning on Collection without Registering
If you plan on selling products online in a state where you don't have nexus, you first need to register with that state. This is important because you could get fined if you start collecting sales tax without being registered. To avoid this, only turn on sales tax collection in your online store for states where you are registered.
Conclusion
Sales tax is often one of the most misunderstood aspects of running a business. If you fail to correctly collect and remit sales tax, you may be subject to penalties and interest. Therefore, it is important to understand the requirements for sales tax in your state and to ensure that you are in compliance.
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