There are several elements that play a major role in managing a growing business, and one that cannot be ignored is managing your sales tax responsibilities. Staying in compliance with sales tax regulations at all times is vital for both maintaining legitimacy and building your profits, and there are a few key areas to be looking at as you go about this.
At SalesTaxSolutions.US, we’re here to help. We offer a huge range of sales tax services, including everything from compliance reviews to nexus determination, sales tax registration and more. What are some of the most important tenets that come with sales tax compliance for a growing business? Let’s go over several across this two-part blog series.
Determining Where You Have Sales Tax Nexus
The first major step for any growing business when you enter a new state or have passed a given nexus threshold is to determine where you have sales tax nexus. What is nexus, and what does it mean for your business? Simply put, nexus is the connection or link required between a business and a state before that state can require the collection of sales tax on purchases made within its borders.
Each state has its own definition for what constitutes “nexus” in its borders, and it will typically be based on a threshold of either gross sales receipts or total number of transactions. You need to be aware that different states have different thresholds, so staying on top of this is vital to ensuring you’re in compliance at all times.
The most common nexus triggers are as follows:
- Doing business via a physical presence in the state (this could include owning property, having a warehouse or office space, etc.)
- Having employees who work in the state
- Selling more than a specified dollar amount of taxable goods and services to customers in the state (this is generally defined by either total annual sales receipts or number of transactions)
Confirming Products Are Taxable
Next, it’s essential for growing businesses to ensure that their products are taxable, as this is a key factor in the collection of sales tax. In general in the US, almost all “tangible personal property” will be considered taxable; however, in some states, certain necessities like groceries or prescription drugs may not be taxable. It’s important to check the laws of your jurisdiction and make sure that you are charging the correct amount of sales tax on all products sold.
Registering for Sales Tax Permits
Once you’ve determined where you have nexus and confirmed that your products are taxable, the next step is to register for sales tax permits in those states. You will need a different permit for each state where you have nexus because of the different rules, rates and requirements regarding sales tax collection and remittance in each location.
As with determining if you have nexus, this is a time-intensive task and one that demands careful attention to detail. If you’re not familiar with the various rules and regulations of these permits, it’s important to do everything in your power to ensure you understand them before registering for any in particular.
In part two of our series, we’ll go over some of the other important parts of sales tax compliance for any growing business. For more on this, or to learn about any of our sales tax services, speak to our team at SalesTaxSolutions.US today.