The Best Things about a Definitive Guide to Sales & Use Tax
A Definitive Guide to Sales & Use Tax is vital for small and medium size businesses trying to compete in today’s world. Trying to keep up with the many changes that happen in this area presents quite a challenge. States ramp up ways to increase their revenue streams, and the US Congress has several bills for consideration as to whether to give states the right to require remote sellers to collect/remit sales taxes. Read on for a summary of the Guide to Sales & Use Tax that will help you find your way.
Guide to Sales & Use Tax
The Guide is a “white paper” report on the current state of Sales and UseTax laws and suggestions on compliance. The guide has six sections as described below:
- An overview of the sales and use tax world: who owns it? Who collects it?
- A review of the ins and outs of the sales tax world, such as exemptions from those laws;
- What steps can your company take to comply with the sales/use tax laws;
- A section that describes the various sales tax rules by state;
- A helpful glossary of terms that relate to these laws; and
- Where you can go to find additional resources.
Sales taxes are ubiquitous in the US
If you are doing business in more than one jurisdiction, you certainly know that. The District of Columbia and 45 states impose some form of sales/use taxes. Five states do not impose state sales taxes at all: Alaska, Delaware, Montana, New Hampshire, and Oregon. While Alaska has no state sales tax, local jurisdictions may impose local sales taxes.
The Census Bureau report says that state sales taxes comprise 31% of state revenues. Only state income taxes are a higher share. That probably means that state sales taxes are not going away anytime soon.
What areas does the Guide cover?
The guide gives easy-to-understand explanations of confusing concepts like the difference between a use tax and a sales tax and what is a nexus anyway. The explanations are in everyday language and sometimes in graphic form which makes difficult concepts like these easier to grasp.
In general, if a nexus exists between the seller and the state where the goods end up in the hands of a customer, then the seller has a duty to collect the sales tax and remit it to the state. That can mean sending tax money to a state’s Department of Revenue, the Tax Commission, the State Board of Equalization or the Department of Taxation.
If a nexus does not exist between the seller and the state where the customer takes delivery, then it is the customer’s responsibility to self-assess and pay the state sales tax.
The Guide goes a long way to helping you understand these and other key concepts behind transactional sales tax compliance. Transactional sales taxes are taxes that states impose for the privilege of doing business with customers in their state. Sales taxes imposed as the result of the sale of a product/service usually require that the seller has a physical presence or nexus in the state. The recent movement is to require remote sellers to collect/remit taxes even if they are not physically present and have no nexus.
Determining the sales tax and use taxes on your products and services
There are over 12,000 taxing jurisdictions in the US. And those state and local jurisdictions raise tax limits on a regular basis to increase their revenue streams. There are also state-by-state exemptions from the tax rules and bundled transactions. For these reasons, the guide suggests that without an automated sales tax/use tax system, companies who do business in multiple states will find it impossible to comply with the rules.
Exemptions, Exemption Certificates, and Audits
The Guide will help your business traverse the world of exemptions and exemption certificates. Also, the Guide includes valuable information on audits, what subjects you to an audit, and how to prepare for an audit.
Remember that compliance with state and local sales tax/use tax laws require your business to complete four steps:
- Registration and tax collection
- Preparing tax returns and filing them with the appropriate authority
- Managing exemption certificates and keeping records
- Managing audits.
To get a better perspective on the world of sales taxes and use taxes, let the Definitive Guide to Sales and Use Tax be your guide.
If you have any questions about this topic and want to talk to one of our experienced consultants, please contact us. We look forward to helping you grow your business.
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