17 Jun 3 Ways to Do Small Business Accounting Sales Taxes
When you are running a business, it is not enough that you just run it. You have to be knowledgeable about taxes—how to pay your tax and the tax you can impose in your merchandise or service. Although you can always hire an accounting firm to do this bit, it still pays that you know what to do. Here are three ways to do small business accounting sales tax.
Learn when to charge sales tax
This is important because the tax is not an automatic imposition of goods and services. There are some cases where goods are exempted from taxes—say, the client is buying products on a wholesale basis. Another reason is when the products are either for resale or as raw material for the production of other merchandise. In case of a resell, the sales tax is imposed on the clients of the resold items. More often, the purchase is by individual items. It is considered a sales tax exempt for raw materials that will be used to produce other items.
It is also worth noting that non-government organizations are exempted from paying sales tax. That is if it can prove that it is a non-government organization and that it has an exemption. The organization, for its part, will have to get a sales tax exemption certificate from the Department of Finance.
Each state has different sales tax laws. To deal with this, you have to first determine if the buyer is from another state. There are two ways the sales tax is charged: based on origin or based on destination. You have to check out the designation of the business. Origin-based tax means that the business owner will heed the local sales tax of the state. On the other hand, if it is a destination-based imposition, you will accede to the client’s sales tax rate from his home state.
Preparing the data
First, you need to get the state remittance form, which you can obtain from your state’s Department of Finance and Taxation. Then you need to figure out if your client is a business or a contractor—it matters to some states. In the case of a contractor, every deal that earns a revenue, whether it is eligible for tax or not, must be entered line by line in a spreadsheet. For the business, all transactions are totaled and then you just provide bullets of what deals resulted in revenue. And then you input all tax-related data: taxed sales, tax-exempt sales, and tax due.
Creating the remittance forms and liability accounts
Receipts and recordings are vital to every business. Keep a recording of transactions and lay out the amount of tax you have collected vis a vis the sales tax liability account for each client. For accountants, once the remittance form is accomplished, it could be mailed directly to the government with payment. Or the form could be given back to the business owner so he can pay for the sales tax obligation himself.
Keep receipts for at least seven years in case of tax audits.
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