Sales taxes present a unique challenge for a business owner and managers – while most people are aware of their requirements to file income taxes and payroll taxes, often sales tax compliance is simply either ignored or forgotten. However, this can lead to a plethora of problems for both your business and for you as a business owner or responsible person personally.
Sales taxes are among taxes that are considered “Trust Fund” taxes and therefore you as a business owner can be held responsible for the payment of these taxes personally – even if you did not collect them. Furthermore, sales tax law is at times notoriously broad and ambiguous, often leading to confusion and debate even among tax professionals. With the continuing budget shortfalls in state income tax revenue, states are relying more than ever on their sales tax base.
Below are some sales tax tips that can help you and your business
- Sales tax assessments from taxing authorities often have estimated amounts that will grossly overstate your sales tax obligation. These assessments need to be examined closely so that you only pay or remit tax that is due
- You should consider the need to charge sales tax whenever you enter a new line of service in your business, or have sales in a new state. Just because a transaction is not subject to sales tax in your primary state, does not mean that it is exempt in all states.
- States are becoming more aggressive in asserting nexus (connection to the state,) thereby having sales tax requirements. You should make sure that you are filing in all states that are necessary and consider the need to file in additional states as your business expands.
- If you have transactions that are both taxable and non-taxable, make sure that they are separately stated on your invoice and accounted for separately in the books and records. If not, the entire transaction may be subject to sales tax.
Cerini & Associates are well versed in sales tax law and requirements and can help your business ensure compliance with sales tax as to not leave you, or your business, on the hook. We also can assist you with any sales tax controversy issues that may arise, such as examinations and assessments.
Edward McWilliams, CPA
Ed is a Partner in the firm’s tax and business advisory practice focusing on providing services to middle market private companies across different industries as well as to early stage startups. Ed has over a decade of experience providing tax and business consulting services to these companies of different sizes and across different industries, bringing a broad and diverse knowledge base and strategic solutions to the many complex issues that businesses face.