The larger your business, the more revenue you probably earn. As your revenue increases, so do your tax responsibilities. While business owners have much on their plates, it’s important to remember state sales tax. Adherence to the rules and requirements means everything runs smoothly, but slip up and you may find yourself in trouble if you fail to learn how to solve sales tax problems. Here are 8 common sales tax problems you should avoid at all costs:
8 Common Sales Tax Problems:
-
Failing to Collect Sales Tax.
For some odd reason, businesses sometimes overlook the need to collect sales tax. There’s really no excuse for this. If you sell a tangible product, you need to collect sales tax. A failure to do so means you lose money on your end, granted you are still paying sales tax to your state’s tax authority.
-
Inadvertent Misuse of Sales Tax Money.
There is absolutely no excuse for misusing sales tax money, yet it still happens on a regular basis. Because small businesses don’t always manage bank accounts accurately and well, funds often become co-mingled. That means business revenue, personal money, and taxes are all sloshing around in one big bucket. When this is the case, it’s very likely tax money will be spent to pay for bills – personal or business in nature. Your state’s authority does not look fondly on this and will enact harsh penalties. To avoid this situation from the start, it’s best to keep separate accounts for all funds.
-
Intentional Misuse of Sales Tax Money.
The only thing worse than misusing sales tax money is intentionally misusing sales tax money This happens when a business owner finds himself in trouble and “borrows” sales tax money to pay off some other expense. In most cases, the owner never recovers the money and cash flow problems only become worse. No excuse will appease your state’s tax authority in this situation.
-
Doing Nothing.
While your state’s does not appreciate inadvertent misuse of sales tax money, they are not the cold-hearted individuals people often make them out to be. It’s always best to pay part of what is owed, rather than avoiding the sum altogether. Many times, business owners think they should avoid the situation if they don’t have enough to cover what they owe. Instead, they should pay what they have and make a case for the remaining balance. Often, your state’s tax authority will develop a repayment plan.
-
Miscalculations.
While all business owners should have a basic understanding of finance and accounting, it isn’t always the owner’s expertise. This means errors are easy to come by when dealing with sales tax. One solution is to run numbers twice through two different tools.
-
Failing to File on Time.
Something as straightforward as filing tax forms on time may seem easy, but to a business owner with numerous things to do, it’s easy to forget. Late tax forms can be costly, so business owners should keep a calendar to remind them of all deadlines.
-
Nonprofit Exemptions.
One common misconception is that all nonprofits are exempt from paying sales tax. While this may be true, it is not necessarily a given. Nonprofit status does exempt federal income taxes, but some states still require sales tax. Business owners should check state laws and regulations to ensure they are following the rules.
-
Online Businesses.
Online businesses are often subjected to different rules and regulations, which can leave owners confused and misguided. One common mistake is believing sales tax is not required for an online business. In the state where the business has a physical presence, it is required that the business charges sales tax. It’s best to check specific rules and regulations regarding this law, as they do change from time to time.
Sales Tax Word Problems
It turns out elementary school word problems are actually useful in real life. If you are looking for answers on how to solve sales tax problems, it may be best to simply practice. Here are some sales tax word problems to get your mind going:
Your local dealership is selling a pickup truck for $18,995. The sales tax is 7{bf3da7fb6a4d0e0e3790d09a79b980fc065e33e2f3a2d49280f7e95b82f4982b}. What is the total price and what portion of that is sales tax?
The total price is $20,324.65. The sales tax is $1,329.65.John purchased two pairs of blue jeans for $29 dollars each and one shirt for $12. The sales tax is 6.5{bf3da7fb6a4d0e0e3790d09a79b980fc065e33e2f3a2d49280f7e95b82f4982b}. How much did John owe and what portion is the business required to set aside for sales tax?
The total price paid was $74.55. The business must set aside $4.55 in sales tax.
Maintain the integrity and reputation of your business with your state’s tax authority by using these 8 tips on how to solve sales tax problems.
Leave a Reply