4 Must Know Tips About Sales Tax For Small Business Owners
Sales tax. We have all heard these two dreaded words said at some point during our lives. Small business owners are no exception. Sales tax is so complex that it can be hard for some business owners to understand it fully or even comply. When you fail to follow the correct procedures when it comes to sales tax, it can put you and your business at risk.
Here are some tips on what you can do to ensure your business stays in tip-top shape to avoid any tax issues:
What exactly is a nexus in regards to sales tax? A nexus is a connection. The primary usage example of “nexus” is a legal term that refers to the obligation for companies doing business in a state to collect and pay tax on sales in that state. To give one example to better understand this process, if you sell goods or services in Miami, you must file and pay Florida state taxes. Taxing jurisdictions, such as states, cities, counties, and districts cannot impose sales taxes until they establish nexus.
The easiest and more common way to establish nexus is through physical presence. Some physical presence examples include but is not limited to:
- Owning or renting an office
- Having a mailing address
- Having a warehouse
- Having employees
Keep in mind though that not all businesses are liable for sales tax under a nexus.
Know Your Payment Options & Schedule
Each state has specific laws in regards to payments on sales tax. Some states may require that you pay on them electronically. Go through the list of acceptable payment methods for your business category in your state to avoid any problems. For instance, if you’re required to have a hmrc utr number and are caught without one, you could be fined a large sum of money.
Not only is knowing the preferred state’s payment option important but so is knowing what kind of payment schedule they expect of you. Sales tax payment frequencies may change within a state from time to time. If your business is affected you will normally receive information about it via mail or email. However, this isn’t always the case, so it’s important to keep an eye out for any changes in your payment frequency.
If all of this still has your mind in a jumbled mess, then consider hiring someone who knows anything and everything possible when it comes to sales tax. Sales tax filing can be frustrating. Sales tax services can be a godsend for someone who doesn’t know a single thing about sales tax and who thinks they may mess something up if they tried doing it themselves. There are sales tax solutions out there for you and your business. Hiring someone who knows their stuff may be your best bet.
You May Be Audited
Keep in mind that there is always that small chance your business may be sales tax audited. All business owners dread this moment but it’s important to know that you aren’t alone. This is when sales tax support may come in handy. Use this moment as a tool to maintain or reduce sales tax. Keep a ledger on hand which you can easily hand over to the auditor to show that everything is in check.
The best way to keep up with sales tax, in general, is to do some research on it and don’t be scared to reach out to someone if you still don’t understand. I hope these 4 tips have given you just a tiny fraction of knowledge gained when it comes to sales tax and your small business.