As small businesses look forward to 2015, tax considerations may be looming on owners' minds. The sales tax implications related to owning your own business can be confusing, and failing to comply with regulations is often costly. Here are nine sales tax tips that small businesses can use in 2015
Make your prepayments.
Small businesses are often required to make prepayments on their sales tax as it is collected. If you fail to comply with this requirement, you could face hefty fines that add to the amount you owe. Remitting sales tax as it is due will keep you from facing a big bill that will impact cash flow. Be sure to check on the requirements for each applicable jurisdiction.
Follow up when you pay your taxes.
Sending a check off to the Department of Revenue each month is not enough to keep you in good standing when it comes to sales tax. There is always the possibility that a check will be lost in the mail or sent to the wrong department, so make sure that the check has been cashed.
Keep track of when you owe.
As a small business owner, you already know that scheduling is an important part of running a successful business. Apply this to your payment of sales tax by keeping track of when you need to remit payments to each jurisdiction.
Take care of problems before they get worse.
If the jurisdictions that you remit payment to send you notices related to a failure to pay, a late payment or any other issue that could result in penalties, take care of the issue right away. Even if you believe that your business is compliant, you need to contact the jurisdiction to discuss the problem.
Keep thorough records in case of an audit.
No one wants to be the target of a business sales tax audit, but even small businesses could find themselves in line for this dreadful event. The good news is that you can make it easier on your business by keeping thorough sales records. However, keeping records is not enough on its own. These records need to be easy to access, and auditors should be able to match up all of the supporting documentation related to a sale with the initial transaction.
Stop using ZIP codes to calculate sales tax rates.
Using a ZIP code to figure out how much you need to collect and remit when it comes to sales tax seems so easy, but taking this shortcut can get you into big trouble. It is possible for there to be more than one sales tax rate in a ZIP code, so it is recommended that you use the specific address of your business to calculate sales tax. If you fail to calculate the right rate and end up collecting too little, you could end up in hot water with the Department of Revenue.
If you operate across state lines, get ready to research nexus laws.
An on-the-go workforce has made it more likely that small businesses will send employees to other states for sales purposes or to deliver products. You may even have remote workers on your payroll. All of these situations come with more complicated tax implications. Any sales that originate out of the state are likely to fall under that state's tax jurisdiction, so you will need to review regulations to properly remit sales tax.
Figure out which products are taxable.
Not all products are taxable, and the determination of what is and is not taxable depends on the state in which you are selling the item. It is essential for you to be aware of whether new products will be taxable before you start selling them.
Check up on tax exemptions.
If you do business with clients that are tax-exempt, you need to be sure that their certificate has not expired. Keeping a record of when these certificates expire is an optimal solution if you do business with several clients that fall into this category. Even if your clients' certificates are valid, you may need to request new ones if you make any major changes to your business.
Sales tax is a complicated concept for businesses of any size. If you want to take the confusion out of collecting and remitting sales tax for your small business, AccountingDepartment.com offers accounting and bookkeeping services.