Definition: A tax collected by all retailers and certain service providers when
they make taxable retail sales. Sales taxes could include state,
county and local taxes.
Sales taxes are levied by many cities, counties and states at
varying rates. Most provide specific exemptions, as for certain
classes of merchandise or particular groups of customers. Service
businesses are often exempt altogether. Contact your state and/or
local revenue offices for information on the law for your area so
that you can adapt your bookkeeping to the requirements.
Before you open your doors, be sure to register to collect sales
tax by applying for a sales permit for each separate place of
business you have in the state. A license or permit is important
because in some states it is a criminal offense to undertake sales
without one. In addition, if you fail to collect sales tax, you can
be held liable for the uncollected amount.
If you're an out-of-state retailer, such as a mail order seller
who ships and sells goods in another state, be careful. In the
past, many retailers haven't collected sales taxes on the sales of
these goods. Be sure you or your accountant knows the state sales
tax requirements where you do business. Just because you don't have
a physical location in a state doesn't always mean you don't have
to collect the sales tax.
Many states require business owners to make an advance deposit
against future taxes. Some states will accept a surety bond from
your insurance company in lieu of the deposit.
It's possible for retailers to defer paying sales taxes on
merchandise they purchase from suppliers. Once the merchandise is
sold, however, the taxes are due. The retailer adds the sales taxes
(where applicable) to the purchase. To defer sales taxes, you need
a reseller permit or certificate. For more details on obtaining a
permit, contact your state tax department.