#taxjar

Sales tax. It’s a term that makes a lot of us cringe when we hear it. But how many of us online sellers really understand it?

Sure, sales tax can be really complicated, but there are some very basic rules to follow that will help you avoid potential penalties with your state. 

1. In-state sales = collect sales tax. As a general rule, unless you live in a state that doesn’t have a sales tax (Alaska, Montana, New Hampshire, and Oregon) you’re supposed to collect sales tax from anyone in your state who purchases from you – even if it’s online. So, if you live in California and sell to someone in California, you’re required to collect sales tax from the buyer. Here’s a helpful chart with sales tax rates for every state.

Where things get a little more complicated is if your business operates in more than one state. Or, if the products you sell are exempt from sales tax. To be safe, contact your state’s board of revenue or taxation and ask them. The folks that work in state agencies are there to help!

2. Pay early! A lot of states will give you a discount if you pay before your deadline. That means you can keep more of your money, folks. Do it!

3. Keep good records Ask any accountant and they’ll tell you that audits are painful enough. Sales tax audits are even worse. Do yourself a favor and check your state’s requirements for record keeping. Make sure you know what you need to keep (for example sales receipts, invoices) and for how long (it’s usually at least a couple of years). At least you’ll be prepared in case your state wants to take a second look at your returns.

Here’s the bottom line: sales tax can seem super complicated to those of us running our own business. The worst thing to do is nothing. Start with the basics of collecting and paying what you owe. Educate yourself and develop a relationship with the people who administer sales tax in your state. All of this will help you avoid surprises and help you better enjoy running your business.