As part of OnlineAdvisor’s efforts to educate, inform and encourage business leaders, we present key financial terms and concepts. Among the areas we manage within retail sales are sales tax liabilities.
Sales tax liabilities are required to be collected by businesses on behalf of local, state and national governments. In simple terms, depending on your local, state and national tax laws, you must collect sales taxes when you sell something. Paying taxes you collect to the proper agencies is required by law. Business owners and companies track tax liabilities on a sales tax liability report and send out the payments.
This report indicates the amount of tax collected and the amount of tax paid to state and local tax authorities. Tax collected by state and local governments varies from one locale to another.
Taxes Vary by State
Certain states charge sales tax for services rendered, including New Mexico. Some of the taxed services are very unique. For example, a bank charges tax for a checking account in New Mexico. In most states, you don’t charge tax for food at a grocery store. Restaurants and coffee shops must charge tax, however.
Collect and pay the sales taxes to the appropriate state taxation and revenue authorities on a monthly basis. Many new business owners can neglect this important task and get themselves into a really nasty situation. If a business neglects to pay the taxes it owes, the state tax authorities will demand the full payment, plus interest and penalties.
Traditionally speaking, you did not collect tax for a sale completed over state lines in the United States. For example, if your business is located in Colorado and you sold something to a customer in Texas, neither state would require you to collect tax. Those rules, especially when it involves Internet-based sales, are changing. It depends on the state your business is located.
You want to make sure that you do the appropriate research and determine if you must charge sales tax. In addition, it is very important for you to make the appropriate payments on time.