Learn more about keeping your business compliant with sales tax requirements.
Is Sales Tax a Direct or Indirect Tax? Sales tax is a consumption tax imposed by the government on the sale of goods and services. In the United States, sales tax is typically levied at the final point of sale.
When it comes to paying taxes as a small business owner or operator, you’re probably already very familiar with transactional taxes - such as sales and use taxes. However, knowing the difference between VAT and sales tax is crucial to maintaining tax law compliance if you are planning to expand your business outside the US.
Learn about the U.S. Supreme Court decision regarding when a state can require out-of-state sellers to collect &remit sales taxes even if they have no physical presence.
Resellers, such as department stores, grocery stores, automobile dealers, and catalog sellers, are in the business of buying goods and reselling the same goods. Resellers purchase items and then sell those items substantially unchanged. Generally, resellers to do pay sales tax when they purchase the items, but must collect sales tax when those items are sold to the end user.
Unless you live in one of the five states that don't impose sales taxes, you have had some experience with paying sales tax as a customer. However, as a small business owner you need to be aware of your sales tax obligations: what is taxable; how the tax is computed and calculated; and how sales tax is reported and paid.
When it comes to sales taxes, most of the compliance responsibilities fall upon the seller. If your business happens to make taxable sales of property or services, you need to be prepared to handle the obligation to register with your state's department of revenue; compute the tax; collect the tax; and pay the tax to your state.
Traditionally, sales tax applied only when goods, not services, were sold. This has been changing and now many service providers need to collect and pay over sales. tax.
Although most states do not impose sales tax on construction services, contractors must be aware sales tax rules when they purchase and bill for supplies that they use. Lump-sum contracts and time and materials contracts can create very different sales tax obligations.
In every state, certain types of items, most commonly food and medicine, are exempt from sales tax or are taxed at lower rates. Certain types of sales transactions are exempt from sales tax, not because the item itself is nontaxable but because of some characteristic of either the buyer or the seller.
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