If you're selling products or services, it's important to know how to collect sales tax. Sales tax is a tax on goods and services that is collected by the state government. As a seller, it's your responsibility to collect and remit the applicable sales tax to the state. In this article, we'll go over the steps you need to take to collect sales tax when selling a market.
Register for a Sales Tax Permit
Before you can start collecting sales tax, you'll need to register for a sales tax permit with your state's taxing authority. This can usually be done online or by mail. Once you've registered, you'll receive a sales tax permit, which you'll need to display in your market.
Determine What You Need to Collect Sales Tax On
Not all products and services are subject to sales tax. The first step in collecting sales tax is to determine what you need to collect it on. In general, tangible personal property is subject to sales tax, but services and certain types of food and drugs may be exempt. Your state's taxing authority should provide you with a list of taxable items.
Calculate Sales Tax
Once you know what you need to collect sales tax on, you'll need to calculate the amount of sales tax to collect. The sales tax rate varies by state and can also vary by county and city. Your state's taxing authority should provide you with the applicable sales tax rate. To calculate the amount of sales tax to collect, simply multiply the total purchase price by the sales tax rate. For example, if the purchase price is $100 and the sales tax rate is 6%, you would collect $6 in sales tax.
Report and File Your Sales Tax
After you've collected sales tax, you'll need to report and file it with your state's taxing authority. This is usually done on a monthly or quarterly basis, depending on your sales volume. Your state's taxing authority should provide you with the necessary forms and instructions.
Record Keeping
It's important to keep accurate records of your sales and the sales tax you collect. This will make it easier to report and file your sales tax and will also help you if you are audited by the state. You should keep records of all sales receipts, invoices, and other documents that show the amount of sales tax collected.
Exemptions and Exceptions
There are certain exemptions and exceptions to sales tax that vary by state. For example, some states exempt clothing and footwear from sales tax. Your state's taxing authority should provide you with a list of exemptions and exceptions.
Penalties for Not Collecting Sales Tax
If you fail to collect and remit sales tax, you could face penalties and interest charges. The penalties and interest vary by state, but can be substantial. It's important to make sure you're collecting and remitting the correct amount of sales tax to avoid penalties.
Tips for Collecting Sales Tax
Here are some tips to make collecting sales tax easier:
Use a point of sale system that automatically calculates sales tax
Keep accurate records of your sales and the sales tax you collect
File your sales tax on time to avoid penalties
Stay up to date on changes to sales tax laws in your state
Conclusion
Collecting sales tax can be a complicated process, but it's an important part of selling products or services. By following the steps outlined in this article and staying up to date on changes to sales tax laws in your state, you can ensure that you're collecting and remitting the correct amount of sales tax.