If you are selling retail products, most states will require you to charge and collect a sales tax from your customers. No, that doesn’t mean you can put this money in your pocket. 🙂
It needs to be remitted to the state. Most states want to be sure that businesses are collecting and paying sales tax. Product sellers are required to pay the tax, whether their customers pay for it or not. Most companies add the sales tax as a percentage to their final price.
Suppose the collection of sales tax is required from your customer in a state. In that case, it is critical to obtain a sales tax license, also referred to as a sales tax permit, for this state. You are only allowed to collect sales tax if you have a sales tax license. The cost for a sales tax permit varies by state, but most states offer it for free or less than $100. You can obtain the license from the State Department of Treasury, Department of Revenue, or Department of Taxation.
It is also your responsibility to determine whether your business is required to collect sales tax. Failure to adhere to sales tax requirements can result in significant penalties, and those penalties can be taxing on your wallet.
It is essential to understand your sales tax responsibilities. Not collecting and paying sales tax can be one of the costliest mistakes for small business owners.
Sales tax is a percentage charged on the retail price of a product. It averages around 7% in many states, but it can be higher or lower. Many accounting software programs or marketplace facilitators such as Amazon include automated tools to help you determine the appropriate amount to charge for sales tax. This depends on the state and city you are operating your business from and your customer’s shipping address or credit card billing address.
Learn more about sales tax laws for online sellers.