Should You Be Charging Sales Tax?

Taxes are a funny thing. Not your taxes that are soon due to the IRS, but things like sales tax. Sellers have struggled with these numbers for years, as they hardly seem consistent and irritate their customers. Some states even have different sales tax depending on which area of the state you’re in.

If you sell online, sales tax used to be a non-issue. But even ecommerce pros have to worry about it now as there are measures in some states to make online sellers charge. So even virtual shopkeepers have to worry about sales tax – it’s inescapable!

So how do you know if you need to start charging? Let’s take a look.

Are You a Business?

The most important thing to consider when deciding whether to charge sales tax is whether your business is actually a business. Confused? You may sell things or offer services, but if you’re not set up as a business in a legal sense, you may not have to charge sales tax. On the flip side, you may consider what you do a hobby, but legally you’re a business and must take sales tax into account.

Have you filled out all the proper paperwork? Perhaps you filed to become an LLC or sole proprietor? Do you have a separate business name from your legal name – for example, Bob Smith owning Bob’s Knick-Knacks? If you haven’t filed all these papers, one or two things is going on: you don’t need to pay sales tax, or you’re operating illegally!

If you’re unsure whether you need to file, check with your local government office. They can not only tell you if you need to file but also what paperwork you need.

If you’re an online business, for right now you’ll have to worry about the state in which you operate. This may change, though, as states like California and New York have tried to push through legislation that would make online sellers have to pay. If this is your main avenue of money, try to keep up with recent developments.

Rules and Regulations

If you offer any sort of service, you probably don’t have to worry about sales tax, as it’s generally for items. However, some areas and states DO require you to charge for services. Again, every state is different, which makes the whole affair such a pain.

For items, you should include sales tax information for your customers’ benefit – it’s just good practice. However, some states actually require you to include this info so as not to confuse people. This is whether you sell at a store, a booth at a fair, or walking around on the sidewalks of the city.

All it takes is a little placard stating “sales tax of 6% added to all purchases” and you’re covered. Don’t let anyone walk away angry and confuse – not only do some states not collect sales tax, some countries have eradicated completely.

Are you in the wholesale business? Then your sales tax laws are even stranger. Luckily, it works a bit in your favor. Just like you buy wholesale items to sell them at a reduced price, your sales tax charges could be lower. Again, a quick check with your local government office should tell you what the specific rules are.