Austin Tax Blog


Whether you run a small or large company, the payment of sales tax is of utmost importance. So long as you offer a taxable product or a service, your business will have to pay sales taxes in your state.

It is true – small businesses are often negligent about the confirmation of sales tax permits. If a reseller, for instance, offers to purchase something from you, do not forget to ask them about the current reseller permit. Once you have the license, ensure the validation of it, and make a copy for sales tax agents who may inquire in the near future.

Moreover, the process of paying sales taxes ultimately depends on the services or products your business sells. Nevertheless, you should collect, report, and file your sales taxes on time. In this article, you will learn about collecting, and filing your sales taxes:

Understand the Nature of Sales Taxes

Business owners should be careful when it comes to sales taxes. In addition, not because they are challenging to collect, report, or file – but the complication of sales rates often bewilders businesses. Today, there are several tax requirements for different states. However, things become get weird when every state has separate tax rates for various products and services.

If you have a nexus or taxable products or services in more than one state, you can collect various taxes on all items. However, if you provide your products or services online, find out whether or not you should collect sales tax from your consumers.

When you understand the basics guidelines of sales taxes, your business will be able to gather, register, and pay sales taxes through a simplified process without hassle. In essence, follow realistic steps that can help you save time.

You can start by finding out whether or not your state permits to collect sales taxes. After that, you can register with your state’s official tax authorities. Remember, If you offer products or services in multiple states, you will have to register in each of those states. Similarly, gather the information on which products and services your state classifies as taxable.

Now, you can establish the right chargeable sales tax rates for your products or services. As of now, there are more than 14,000 tax collection variations in America. It is reasonable to make mistakes at first to establish and collect sales taxes. To reduce the complications and confusion, you can look over the current sales tax rates.

Before you initiate your sales tax process, establish whether you offer products or services online or at a physical retail outlet. After that, you can collect your sales records for entire sales and taxes via a bookkeeping or tax software. Now, send the report to your state and pay the required sales taxes. Now, that is not so hard, is it? Here are some other details you should keep an eye on:

How to Identify the Applicability of Sales Tax

You should collect sales taxes from your customers when your business classifies as a tax nexus. Moreover, if you offer products or services online, you will need to check conditions to collect online sales taxes in every state.

Find Out Taxable Products or Services

It is imperative to understand that not every product or service is taxable. It means one state may view your product or service taxable while the other may not. Ironically, states are including more products and services as taxable items more than ever.

What is even more interesting is that states are trying to establish different criteria for each service and product. That said, the method of collecting, reporting, and paying sales taxes is similar for small and large companies.

Register Your State Sales Taxes

Once you establish your taxable products or services, you can collect sales tax in your state, head over to the site of your state and register the sales tax permit to official authorities. The reason to acquire permits is to collect, register, and pay sales taxes legally on your taxable products or services.

You should be able to collect other business data through your federal employer ID. Take a sigh of relief in knowing the fact that most of the states permit online registration. Thus, it makes sense to prepare the required information beforehand.

Learn to Collect Your Sales Taxes

Your business should charge sales tax if you provide products or services online to consumers who are situated in your state. For example, if you run an online retail store as well as a physical outlet (like Express or H&M), you can collect sales tax for all online transactions.

In addition, several states want businesses to add sales tax outside their geographical boundaries. Moreover, that is because individual states have the freedom to set the standards of sales taxes. Contemporarily, some states exempt sales taxes when it comes to small business owners. However, the exclusion does not apply to businesses under $100,000 annual sales valuation.

Don’t Forget about the Collection of Sales Tax Rate

Here’s the thing, most states focus on source (seller) location while some states set sales tax rates based on the buyer’s destination. California, on the other hand, has source and destination sales tax rules. In addition, that is the primary reason sales tax rates often change. However, your location plays an integral role.

Proceed to Collect Sales Tax from Your Customers 

Once you get your sales tax license/permit, your business can collect sales taxes. You should, however, present the tax value individually for customers to check the tax amount. Online sellers will see this amount on their shopping cart and calculate sales tax.

Evaluate Relevant Exemptions of Sales Taxes

The exemptions are applicable when your business offers a product or service exempted from your state. Similarly, get a certificate of your sales tax to find out whether or not resale items have an exemption. Also, make a copy of your customers’ sales tax certificate in case of an audit.

Maintain Records of Your Sales Taxes

You can collect your sales taxes after assessing exemptions. However, you must keep a comprehensive record of the total collected sales tax. You can create sales transactions in tax software like QuickBooks to automatically maintain the transactional records into your account.

The Payment of Sales Tax 

It would be wise to check the requirements of your state before paying your sales taxes. Remember, the consistency of sales tax payment relies on the size of your total sales. The majority of states, businesses are required to pay monthly.

However, if you accumulate a large sales volume, you will have to pay quarterly. Though most importantly, do not forget to pay your sales taxes on time to stay away from hefty fines. Small businesses should also make the most out of prepayment discounts on sales taxes.

Final Thoughts

Luckily, if your business operates in AlaskaMontanaDelawareOregon, or Hampshire, there will be no applicability of sales tax whatsoever.

In hindsight, your sales taxes depend on the geographical location of the buyer and the seller. However, find out more information about your revenue requirements of your state department.

Also, do not rely on outdated information. Instead, confirm that rates of sales tax are up-to-date so that you can charge the correct tax sum to your customers.