How To Collect, Report, and Pay State Sales Taxes
By Jean Murray. US Business Law / Taxes Expert
Jean Murray has the education and experience to help you become an expert in your small business, and to provide you with information about business legal and tax issues. With an MBA and a PhD in entrepreneurship, she brings almost 30 years of experience and knowledge to these important business subjects.
You can also read more about Jean's current and past work on her About.me page.
If your business sells a product or provides a services that is taxable, and if you are in a "sales tax " state, you will need to set up a process to collect and pay sales taxes and file sales tax returns periodically. This article will walk you through the steps involved in this process. (If your business is selling in Alaska, Delaware, Montana, New Hampshire, or Oregon, no sales tax is charged, so you don't have to worry about this process.
Lucky you.) It has been estimated that there are 11,000 tax collection entities in the U.S. so determining
and collecting sales tax can be very complex!
Time Required: Varies By Volume of Sales
- After you have received your sales tax permit, you can begin collecting sales tax from customers. You must show the tax amount separately, so the customer can see the amount of the tax; this typically isn't a problem, since most sales receipts are programmed to show the amounts. If you are selling online. your "shopping cart" page will show the sales tax calculation. You will need to program the computer for the applicable sales tax amount or amounts.
- If you are selling in multiple locations, you must include the correct sales tax for each location. For example, if you are selling products in several cities or counties within your state, the correct amount must be collected from each locality. This gets complex if you have many places where your products are being sold. If you are selling in several states, you must also program the correct amount for each location within each state.