Hello Striegel Knobloch & - Here Are Your Articles for Wednesday, December 27, 2017
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How Do You Handle Sales Tax?

 

Collecting and remitting sales tax can be a daunting proposition, and when sales cross state lines, the task can become even more complicated. Here's how to get started on the right foot with a few simple steps.

  1. Register with your state. Alaska, Delaware, Montana, New Hampshire, and Oregon are the only states without a sales tax, so businesses located in those specific states don't have to worry about a sales tax. Everyone else needs to visit their state's website, locate the Department of Revenue, and register for a sales tax permit. You'll also need your Federal Employer Identification Number and information about your business and its owners. Most states today allow online registration.
  2. Calculate sales tax. Once you've registered, you can begin collecting sales tax from customers. You need to show the tax amount separately so customers can see the amount of tax. Fortunately, most sales systems calculate sales tax for you. For instance, if you sell online, your shopping cart page should show sales tax calculations.
  3. Collect sales tax. If you sell across multiple states, cities, and counties, you must include and collect the correct sales tax for each location. This can become complex if your goods or services are being sold in many different locations.

The Complex World of Nexus

This bring us to the tax concept called "nexus." Do you have a physical place in a given jurisdiction that would require you to collect sales tax? Besides the obvious impact of having a store, having even a warehouse or sales office also can establish nexus. Indeed, nexus is created if your company maintains a temporary or permanent presence of people or property. The temporary presence can include even employees visiting states to call on customers or prospects, trade show attendance, or consigned inventory in warehouses.

Nexus is not clearly defined by each state and varies in the number of days and activities performed in the state. If, however, a state thinks your business entity has established a direct or representational presence, then the state may feel that it has the right to require your company to pay or collect and remit certain taxes. So even if you're in one of the five tax-free states noted above, you could still be on the hook for sales tax payments somewhere if your business crosses state borders.

Making the issue even more complex is a June 2018 ruling from the Supreme Court saying nexus may not even be an issue anymore. Each state will have to decide how it will address the ruling, aimed at leveling the tax playing field.

This clearly is a complex issue, especially as states look for ways to fill their coffers. However, we can help you identify your obligations and set up a system so you can determine nexus and meet those obligations. Give us a call today, and we'll help you decide what's right for your business.

 
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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