How To Pay Sales Tax For Your Small Business
When you manage a small business, you must understand how to pay your employees, handle payroll taxes, and pay your sales taxes. Sales tax can be confusing because it shows up as part of the total amount everyone pays, but you must pull that money out to pay the state. Continue reading to learn more about handling sales taxes properly. You must do this properly to ensure that you are on the right side of the law.
What Are Sales Taxes?
A sales tax filing should be handled after you have reconciled your accounting for the month. Sales taxes are collected on behalf of the state, city, or local municipality to pay for a wide range of public works.
For example, you may live in a state that charges a five percent sales tax on all eligible purchases. However, your county may charge an extra one percent sales tax to pay for public works in the county. That can be taken a step further when your city or township charges a one percent sales tax for public works. In all, you will charge a seven percent sales tax to your customers.
The customers must be informed of the sales tax on every receipt, and they need to see the subtotal before sales tax. This is very important because some people are writing off expenses before tax. Even more important is the fact that customers need to know how much your products or services cost pre-tax.
How Do You File Sales Taxes With The Government?
When you have collected your sales taxes, you need to complete a sales tax filing that sends all that money to the state. You should send your sales tax money to a special account, and you can transfer that money to the government when ready. The filing should come along with paperwork that explains how much you are paying, and you must keep a copy of your sales tax submittals for your records.
The sales tax transfer should also come with an acknowledgment from the government that your sales tax has been received. This is important because you do not want to be accused of not paying your sales taxes.
When Should You Pay Your Sales Taxes?
Most businesses will pay their sales taxes every month. However, you may choose to pay your sales taxes every quarter. Check with the governmental agencies that collect your sales taxes. These agencies can tell you when they want their taxes to be paid. You may need to send a check, or you can use a wire transfer. You may need to drop off the check at a local office, or you might need to use a wire transfer to a bank in another part of the state.
You should pay your sales taxes on the first of the month when they are due. It is simple to keep track of the payment date because it lands on the first of the month, and you should make sure that the state, city, or county knows that your payments are coming. Their offices are extremely busy, and you need to follow up whenever possible. If you do not follow up with the government, you may not know if the money was received.
You Need To Create A Spreadsheet That Shows How Much You Owe
When you are paying sales tax to the government, you need a spreadsheet that shows how much you should pay. You can submit your payment with the spreadsheet so that there is no questioning your math. You may also be asked to submit a form for the government. When that is the case, you should use their form, send your spreadsheet as proof, and keep copies for your records.
You might want to create a spreadsheet that has formulas for your sales taxes, and you can check the math manually. You can even order software that will help you with your sales tax calculations. Consider using this software when you are not sure that you can calculate your sales taxes properly.
Why Do You Need Software For Exempt Items?
You should use software for exempt items because you cannot keep track of everything that is taxed and not taxed. Your state will publish a list of all items that are exempt from sales taxes, and you can use software that consistently updates using that list. The program can scour all your items to ensure certain items do not have tax added. This is very important because you do not want to overcharge your customers. If your customers know that these items are exempt, they will be upset that you have tried to charge even more money.
What Happens If You Do Not Pay Sales Taxes?
When you have not filed your sales taxes, you could be fined or cited by the state. The state can charge fines when you have not paid your sales taxes, and the state, city, or county can even file a lien against the property that you own to retrieve the money. You do not want to force a government agency to take the money from you, and you do not want to pay fines because you have not collected that money from customers. Some people are simply confused when they collected their sales taxes, and they can reach out to the government agencies that want to collect their taxes. Someone in that department can help you so that you can pay your sales taxes properly.
You Can Learn To Pay Your Sales Tax Properly Today
Make sure that you learn how to file your sales taxes with the state, county, or city before you open your business. You can use the software when needed, and you should ensure that you are sending your payments promptly. A business that handles sales taxes must also know when items are exempt from sales taxes. This is a simple process that requires a little work on your part and a few simple calculations based on state, county, and local sales tax figures.