Sales Tax 101 for Handmade Sellers
A guest post from Outright
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Creative types like handmade sellers usually don’t get into business to deal with all the financial stuff that comes with the territory. However, it’s a necessary evil if you want to run a successful company, no matter the size and scope. Ignoring it in hopes it all just goes away rarely works for anything!
One financial issue you must deal with is sales tax. Even if you live in a state that doesn’t have sales tax you still must deal with it if you sell online at all. If you don’t deal with it, your state, county, or even city will come collecting one day and you’ll be in a heap of trouble.
To help you out, we thought we’d give you a Sales Tax 101 heads up on what you need to know. For more information and any questions you may have, visit our Outright Tax Center.
What is Sales Tax, Anyway?
Sales tax is like any other form of tax in that it’s collected by a government to help pay for certain things like schools, firefighters and roads. It’s not a definite thing it exists in your area, as some states and/or local areas don’t have a sales tax. Similarly, just because your state has sales tax doesn’t mean your city or county does (though you’d still pay state sales tax) – it all depends on how they run things there.
Basically, there’s a set price for an item at the store. When you take it up to the cash register to purchase the item, if there’s a separate charge for the item, that’s the sales tax. The store has to collect that to pay into their local governments. The rate they’re charging you is how much their governments told them to collect or face penalty.
The same thing goes for you. After you figure out what you’re supposed to charge and collect, you have to make sure you’re keeping proper track of everything. Eventually, you’ll have to remit all the sales tax you collected back to the state.
What do I do?
One of the first things you should do before collecting any sales tax is to set your business up as, well, a business. This involves registering your company as a business through state and local governments. This way you’re not only a legitimate entity you can also properly work with whatever sales tax you must deal with. For more information on registering for a sales tax permit, visit Outright’s Sales Tax Resources for Online Sellers in Every State.
Next is a step many new business owners like to skip. You should set up a totally separate account for your business instead of using your personal account. While this may seem like a huge headache but it will actually save you a ton of time and pain. The last thing you want to do is totally goof up your sales tax totals because you confused a deposit as a sale.
Now comes potentially the hardest part – research! Every city, state etc. is different and you have to know exactly how much you’re going to collect. If you get it wrong all your efforts may be for naught. Plus, if you sell online, don’t forget many states are demanding sales tax payments, so stay on top of the news.
Another part of this research is finding out how often you have to pay. Again depending on where you operate your business you may have to pay out every month, quarter, half-year, year, or some other period of time. Some areas let you choose dependent on how much you’re making through your store, which can be helpful for a business owner trying to figure all this out!
To get started collecting and remitting sales tax, find your state on this list and apply for a sales tax permit. And if you have any questions about sales tax, be sure to ask the finance pros over at the Outright Community!
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