Businesses selling products or services in the US with annual sales of over $100,000 must collect and remit sales tax, based on the state in which their business is located. If your business operates in multiple states, you need to collect and remit taxes for each state. Sales tax rates can be different for each state, so charge the correct sales tax for the state in which your business is located.

If you are a small business owner looking to sharpen their knowledge on business taxes, you have found the right article!

State Tax Filing Tips You Should Know for Before Tax Season

1 - Automate your in-store sales taxes

If you do not already have a point of sale system that is set up to collect and remit sales tax, you will need to consider changing your software solution before sales tax. This can be a very complicated process for a small business owner because it involves entering thousands of transactions, a task that even the most seasoned business owners would struggle to complete.

Google Sheets can be a great option for those business owners who have less than 100 transactions per month and do not have the technical knowledge of other options. The add-on for Google Sheets allows you to create a spreadsheet that contains the sales tax rates for each state, so you can easily determine your sales tax rate for each state.

2 - Know which states charge sales tax on shipping

If your state charges sales tax on shipping, then you will need to charge sales tax on shipping costs. This is because some businesses only charge the shipping cost and do not charge the sales tax on shipping, which is a mistake that could cost you thousands in sales tax.

Although the majority of states do not charge sales tax on shipping, you need to make sure that your business will not be hit with a sales tax bill if your state chooses to tax shipping costs.

3 - Create a dedicated sales tax account

Having a separate sales tax account will help you keep track of your sales taxes each month. If you do not have a separate account set up, then you should consider setting one up with a payment schedule of every two weeks.

The more organized you are with your accounting, the better you will be able to manage costs and stay on top of your business finances.

4 - Work with a tax and accounting agency

Although you may feel that taxes are not important for your business, you need to know that not collecting and remitting sales tax for your business could result in penalties and fines. Do not take the risk of not collecting sales tax from your customers.

Working with a tax and accounting agency can help ensure that you will not make any sort of tax mistakes. Letting an experienced tax and accounting business handle your sales tax can help you stay on track and avoid a potential audit.

Conclusion

Being prepared for sales tax season is essential for any business owner. By manually entering transactions and calculating sales tax, you will be setting yourself up for failure. Instead, you should automate your in-store sales taxes by working with a point of sale software that is capable of automating sales tax.

Should you need help with sales tax filing in Denver, come to Tottax. We help small businesses and their owners in solving problems associated with accounting. We do personalized business consulting depending on your needs and goals—tax planning and Tax Filing in all 50 states.