Have you recently started an online small business? Or are you just starting to sell your products online? If so, you will need to know how to handle the sales tax on your transactions. Luckily, there are several ways to take care of this liability to keep your business running smoothly and legally. This post will discuss six tips for managing the sales tax on your online small business from this resource.
Collect Sales Tax from Customers
If you have a physical presence in a state, you must collect sales tax from customers in that state. This means that customers at those locations must pay sales tax on their purchases if you conduct business in the state, such as by having an office or warehouse there.
Register For a Sales Tax Permit
To comply with sales tax laws, you will need to register for a sales tax permit in each state where you have a physical presence. This way, you can comply with sales tax laws in each state where you have a physical presence.
File Sales Tax Returns periodically
Once you start collecting sales tax, you will also need to file returns periodically. Most states require businesses to file returns quarterly, although some may require more frequent or less frequent filings. Be sure to check with the department of revenue in each state where you have a presence to find out the specific filing requirements.
Keep Track of Inventory and Compute Sales Tax on Taxable Items
To charge the correct sales tax to your customers, you will need to keep track of your inventory and compute the sales tax on taxable items. Some items are taxable while others are not, even if they both fall into the same category. For example, clothing may be tax-exempt if not for a specific type of sport, such as skiing or swimming. This includes taking into account any applicable discounts that you may offer.
Charge the Correct Amount of Sales Tax to Customers
It’s also important to make sure that you charge the correct sales tax to your customers. This includes applicable taxes and any discounts, such as for customers who are members of your rewards program. This means including both state and local taxes (if applicable), as well as any discounts that they may be entitled to.
Remain Compliant with State and Local Laws
Finally, it is important to remain compliant with all state and local laws governing sales tax collection. This means understanding and following the specific laws where you have a presence in each state. You can avoid any penalties or fines that may be assessed for noncompliance by doing so. This can be a daunting task, so it is important to stay informed about changes in the law that may affect your business.
As a small business owner, you need to know about sales tax collection and compliance. To make sure your company is compliant with state and local law, review the following guidelines for collecting and calculating sales taxes on taxable items in each of the states where you have a physical presence. Remember also to file periodic returns when required by your jurisdiction so that they can collect any owed funds from previous quarters.