Sales Tax Compliance – What Every Business Needs to Know

Sales Tax Compliance – What Every Business Needs to Know

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Sales tax is a consumption tax imposed by governments on the sale of goods and services, and it is typically collected by businesses on behalf of the government.  By nature, sales tax compliance is mandatory and complex.   In recent years, rules surrounding sales tax compliance have continued to expand, particularly if a business is selling in multiple states.

If your business is selling products, the first step is to be sure you are registered to collect sales tax in the state where you are selling.  If you are selling in multiple states, each state will have their own set of requirements and deadlines.  Once you are registered in the appropriate jurisdictions, it is important that your point of sale (POS) or invoicing system is setup to collect the correct amount of tax on each sales transaction.  You will be relying on these systems to generate accurate sales tax reports.

There are a few common risks related to sales tax compliance that companies need to be aware of:

  • Incorrectly calculating the sales tax liability
  • Filing sales tax reports late and missing established deadlines
  • Incurring penalties and interest due to late filings and payments
  • Errors in inaccurate filings and payments

There are several applications that can automate the sales tax compliance process and work well with existing accounting software.  When setup correctly, the applications will track and calculate the sales tax liability accurately.  Staying on top of this important business requirement will minimize your compliance risk.

It is crucial to consult with a tax professional or an accountant who is familiar with the tax laws and regulations in your specific jurisdiction. They can help you understand your sales tax obligations, guide you on how to register for sales tax if necessary, and ensure compliance with all relevant tax laws.

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