Does My Business Need to Collect Sales Tax?

A small business faces numerous hurdles along the way to success. At the top of the list is navigating the various local, state, and federal taxes obligations the business incurs. Neglecting to file taxes that the company owes can cause a fledging business to fail before it even gets off the ground. Among the potential tax obligations that a business may incur is the requirement that the business collect sales tax. Calculating the amount of sales tax due is complicated; however, before a business gets to that point it must decide whether or not it is even required to collect the tax, and if so at what rate.Sales tax laws and rates vary from one state to the next, and sometimes from one city to the next within the same state. In addition, the rates are subject to change, and do change on a regular basis. If you deliver products or services to people in a state within the United States in which your business has any type of physical presence, you may need to collect sales tax if that state imposes a sales tax.Almost all products that are sold on a retail level are taxed, assuming the state in question collects sales tax. Some of the important exceptions include food, prescription drugs, animal feed and products that are intended for re-sale. Services are much more complicated. Some states exempt all services while others only exempt some services.

The requirement that your business has a “physical presence” in the state also leads to much confusion. A “physical presence” does not just mean an actual brick and mortar office. A call center, sales agents, warehouse, or other “presence” in the state can create the legal nexus required to trigger the sales tax obligation.

If you are in doubt about your situation, feel free to call our office.

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