September 2, 2021
As an American business owner, you are already aware that there are no sales tax requirements on a federal level. States individually oversee all sales tax laws, including allowance for local sales tax rates and state-mandated sales taxes. It is important to understand the difference between these two types of sales tax rates to avoid overcharging or undercharging your customers on sales tax. Always consult with your state’s local tax regulations to ensure that you are charging the proper sales tax rate for your business.
Although not all, most states allow for both state-required tax rate and local sales tax rates. As mentioned, it’s important to know the difference between the two because the state tax rate may not be the same rate you should be charging your customers.
If you have an established business presence in another state other than the one you are founded in, you will likely have sales tax responsibilities in that state as well. This is known as a sales tax nexus. In most cases, a sales tax nexus is defined by brick-and-mortar status, meaning that you have an actual physical location in another state. However, some states will consider any type of business action in another state a sales tax nexus, including e-commerce.
As an American retail business owner, you are required to report your sales taxes during the authorized reporting periods if you have a sales tax nexus in other states. It is important to speak with your business CPA in Indiana to ensure that you are on track with all of your business’s bookkeeping and tax planning programs.
In the case that your American business is shut down, whether temporarily or permanently, you are still required to file your tax returns during periods of no sales. This means you would file a $0 sales tax return.
One the most effective ways of tracking and reporting your sales tax is to keep a separate bank account just for the taxes you collect. This will provide a streamlined and organized foundation for all of the bookkeeping, payroll, accounting, and tax planning elements of your business. Another important tip is to choose a qualified and professional Indianapolis IN business accounting firm to navigate all of your business tax planning and preparation needs.
Would you like some personalized guidance on your business tax planning and preparation approach? Contact Aspire CPA at (317) 469-4500, or email our office at acct@aspirecpas.com, and speak with a licensed Certified Public Accountant to learn how our business tax services in Indianapolis, Indiana can help grow your bottom line.
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