Taxing customers can be a tricky business, but it's important to understand the rules and regulations in order to stay compliant. Most people are familiar with the sales tax that stores charge customers in many states. If you own a store in a state that collects a sales tax, you must add state and local sales taxes to the customer's total bill, collect them, and send them to the local tax authority. However, if you sell your products online, you may or may not have similar sales tax collection rights. The first step is to find your sales tax rate with a sales tax calculator or by contacting your state's tax authority.
For example, if your local sales tax rate is 8.5%, you would charge an 8.5% sales tax on all transactions, as long as the item you're selling is subject to sales tax. Retail sales of tangible personal property in California are generally subject to sales tax. Examples of tangible personal property include items such as furniture, gift items, toys, antiques, clothing, etc. In addition, some service and labor costs are subject to sales tax if they result in the creation of tangible personal assets. Errors in filing or remitting sales taxes or even not making a scheduled payment may result in criminal penalties or charges.
The tax does not apply to shipping costs under these conditions if the charges are clearly indicated as a separate entry on the invoice or other sales invoice. If your company's annual sales stay below the threshold, you don't have what's called an economic nexus, and you don't have to worry about sales tax. However, if you're not sure if you have a sufficient presence in a state for sales tax purposes, check with that state's tax agency. The tax applies to shipping costs if you use your own vehicle, regardless of whether those charges are indicated separately on the invoice or not. Companies, regardless of what they sell or who they sell it to, are required to file a sales tax return, and failure to do so can result in fines and legal problems. Discover industry-specific deductions, get unlimited tax advice and 26% of a final expert review with TurboTax Live Self-Employed. So, you've learned state and local requirements, started collecting sales taxes, and keeping detailed records and documentation.
While it may take some work to determine what types of sales taxes to charge for the different services and goods your company offers, it's worth it in the long run. You can file sales tax returns and make your payment electronically by creating an online business services account. Resellers and consultants from direct selling companies (e.g. Avon, MaryKay, Tupperware, Amway, and others) may not need to request a resale form, since the direct sales company they represent has a state merchant certificate and collects sales taxes, along with payment for the products, directly from the distributor or consultant. That's not a good idea, not for your customers who may not appreciate being taxed for something they shouldn't pay or for your company which could be fined for collecting unnecessary taxes or even being accused of tax fraud. That relationship could require you to collect sales taxes from customers in other areas where Amazon does business. The consumer use tax is a tax that is levied on the buyer and the buyer collects it himself on taxable items purchased when the seller did not collect any sales or use tax from the seller.
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