Whether you’re a business accountant serving a business owner or you’re an entrepreneur, it’s vital to decipher sales and employment tax registration and continuing requirements. Federal payroll taxes are the same regardless of where a business is located. However, state employment taxes and sales taxes vary by tax rates in the different states.
This blog post provides a lot of helpful information on sales tax, as well as registering for & paying sales tax. And keep in mind, a sales tax services provider can assist in getting your business up and running quickly. You can use professional sales tax registration services to help make the startup process as easy as possible.
Breaking Down Sales & Use Tax
Sales Tax
Sales tax is a transactional, consumer-dependent tax on the sale, transfer, or exchange of a product or service that’s taxable. It is typically defined as a retail tax as it is normally added to the sales price of the product or service and collected at the time of purchase. Sales tax is deemed a pass-through tax. The entrepreneur doesn’t need to pay the sales tax but on the contrary, they serve as a conduit to collect the tax from the consumer and transfer it to the government.
Most states and around 14,000 local jurisdictions such as counties, municipalities, and other local government bodies impose sales tax. 45 states and the District of Columbia collect sales taxes in some form. The five states that don’t collect sales tax are Alaska, Delaware, Montana, New Hampshire, and Oregon.
Use Tax
Use tax is simply a tax on the storage, usage, or consumption of a taxable product or service upon which no sales tax has been paid. Usually, it’s collected when something is purchased outside the taxing jurisdiction. Use tax is broken down into two categories:
- Consumer use tax
- Seller use tax (also called retailer use tax, vendor use tax or merchant use tax)
Managing the Sales Tax Process
Register for a Sales Tax Permit – Registering for sales and use tax is mandatory for both for-profit businesses and nonprofit entities. Local governments will penalize businesses that don’t comply with the proper collection, reporting, and payment of sales and use tax.
In areas where sales and use tax apply, a retailer should get a Sales Tax ID Number, seller’s permit, or a sales tax permit. Application for a seller’s permit is submitted to the state’s Department of revenue or Treasury. The request needs to be made only after a business has formally registered with the state and got an EIN from the IRS.
Collect Sales Tax From Customers – After the sales tax registration process is completed the sellers or businesses that sell goods should calculate and collect sales tax at the time of purchase. They should then hold that sales tax till filing a return and remit it to the proper tax authority.
Complete and File Sales Tax Returns – Most states make use of electronic filing for sales tax returns. Business owners basically log onto the state’s Department of revenue (or treasury) website and input the needed data into a form. Certain states have their system set up to let businesses import their data.
Conclusion
In this post, you got first-hand information on sales tax and how to register and manage the sales tax process. However, it is best to get the assistance of an expert sales tax services provider to complete the process accurately and timely.
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