Sales tax is just one of the small business taxes that mompreneurs have to pay. Sales tax is compulsory and the money is used by the government to pay for budget items like public safety, schools, roads, etc. Any business that sells a taxable service or product must charge customers sales tax, file a sales tax return, and pay the money over to the tax authority.
Filing sales returns can be a time-consuming and frustrating process, especially if you sell various types of products or your business operates in various states. There are various types of services and products where sales tax is chargeable. For instance, if you are starting your own voIP business, you will be responsible for paying voip sales tax. Have a look at these helpful sales tax information to help you with the process of reporting and paying sales taxes for your business.
Helpful Sales Tax Information for Mompreneurs With Online Businesses
Determining Whether Your Service or Product is Sales Tax Chargeable
State laws differ relatively significantly in terms of which services or products are sales tax chargeable. Certain states are exempt from charging sales taxes, however, in many states sales tax is chargeable. Retail items like clothing and handbags are subject to sales tax. Food items and prescription drugs, however, are exempt.
Each state has its own set of rules. With selling items online the process can become even more complicated. Usually if you sell products or a service online, and your business has a tax nexus in a particular state or states, you must pay sales tax. Tax nexus usually involves having a physical store in a state, employing staff members in a state, or exceeding a certain sales volume threshold per annum.
Sales Tax for Online Sales
Many online companies must pay sales tax, even if the store does not have a physical store or other presence in the state. eCommerce sellers must collect and pay sales tax. However, in most states sellers who process less than 200 internet transactions or have a sales turnover of less than $100 000 per annum.
Sales Tax For Electronic Products
Sales tax laws have evolved over the years with internet streaming becoming such a commodity, and more individuals consume television and media online . Most states have electronic downloads which include downloadable ecourses, digital music files, and books.
Sales Tax for Services Rendered
Only tangible products were subjected to sales tax originally. But, many states have since added personal services like lawn care, pet grooming, and hair salons to the list of items that are subject to sales tax. If you have uncertainty about whether your service or product is taxable, contact a professional tax agency or local revenue department for assistance.
Registering For a Permit
Before collecting sales tax, you have to be registered for a sales tax permit in every state where a taxable nexus for you is applicable. If you conduct business in various states, you must be registered in each one of them.
Calculating Sales Tax Rates
The sales tax rate chargeable is contingent on where your products or service is sold. If you sell in more than one state, you will have to calculate and collect sales tax in each one. Most states have destination-based sales tax that refers to where the buyer utilizes the product. A few states have origin-based sales tax which means the transaction is considered to happen in the state of origin even if the item was shipped from somewhere else.
How To Collect Sales Tax Online
To make the process of sales tax calculation and collection easier, you can use point of sale software that automatically calculates the sales tax for the correct state. Whether you use a POS or are making your own calculations, the sales tax must be displayed in a separate line on the invoice from the purchase price of the sold item.
Filing Tax Returns and Making Payment
You must file your sales tax return and make payment before the deadline. Due dates for submitting sales tax returns vary for each state. Some states might want you to report and pay sales tax monthly while others might have annual or quarterly cadence. Luckily, for most states reporting and paying sales tax can be done online. Even if you did not have any transactions for the reporting period, you must still file a sales tax return in each state for which you have a tax permit. By not doing so, you can face a fine or have your sales tax permit rescinded.
We hope this post about helpful sales tax information for mompreneurs with online businesses will make the process of filing your sales tax returns and making payment a whole lot easier.