174 - Laying the Groundwork for Understanding Sales Tax 101
When a business is in the business of selling something, chances are they have a sales tax filing obligation. Sales tax is a consumptive tax, based on consumer consumption of tangible personal property.
As a business, you act as an agent on behalf of your state to collect the tax. The tax belongs to the state, not to you. Every state is different and even every locality can be different. There are local tax rates, but the state collects everything. You file it all on one form and then it's up to the state based on the form to send those tax dollars to the local government.
If you are running a business, you want to visit the state tax website to learn more about your area's basic tax rules. Failing to pay the sales tax and keeping it for yourself is illegal and can result in jail time. It's critical to keep record of your sales tax as part of your bookkeeping, consider keeping the sales tax money in its own bank account so that's ready to pay each quarter.
Homework: Figure out if your state generally taxes services or does not tax services. If your state does tax services, then do a search to see if your industry happens to be exempted or your type of service. If you're in a state that does not tax services, ask yourself if there are any pieces of your business that still should be subject to sales tax
Get in touch with our guest
Amy Monroe, Sales Tax Guru
Follow Amy on Instagram at @iamamymonroe