Monday, October 6, 2014

What you don't know about Sales tax can hurt you

Many small business owners launch their business or branch off into a new line of business with only a limited knowledge of how their activities affect sales tax. It has always been a challenge to understand the sales tax codes of your own state. However, the days of only worrying about your own state’s sales tax are gone. There are activities that are common business practice which may make you liable to register and collect sales tax in multiple states. What are the questions that you should be asking? Following are just a few:

Are you selling a product or a service? If a service, is it a taxable service in your state? Is it taxable when combined with selling a product?

Are you selling from only a brick and mortar location or do you also have a web presence?

Do you sell only within one state or do you sell in multiple states?

Are you a manufacturer and/or distributor? Do you sell wholesale or retail?

Are there circumstances in which you do not have to collect sales tax? Do you understand those circumstances? Do you have the correct exemption certificates on file?

What type of sales activities do you do outside of your own state?

Do you attend trade shows in other states?

Do you have employees or outside reps who market your product in other states?

Do you do any affiliate marketing?

Do you maintain inventory or warehouse space in other states?

Do you install and/or repair equipment that you sell in other states?

These are just some of the many questions that need to be answered in order to determine which states you have created nexus in. The challenge is that the laws of each state differ. Be sure you investigate this yourself or get outside help before you find yourself on the hook with Sales Tax issues.

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