Simplifying Sales And Use Taxes

by Karen Stern

As a small-business owner, it’s important to be aware of your sales tax obligations. Whether you’re collecting, calculating, reporting or paying sales tax, it can be easy to get overwhelmed with sales tax compliance. Here are some tips on what you should know in regard to sales and use tax:

• What is the difference between sales tax and use tax? Rates vary depending on the tax type, as does the burden of collection.

• Which business activities create nexus? This is especially important for businesses that do work or solicit sales across state lines. A business should discuss any changes in its operations with its tax professionals to ensure the business has not triggered nexus in any additional states.

The following types of physical presence may create sales/use tax nexus in a state:

• Property

• Employees

• Independent contractors/agents

• Affiliates

• Agents

• What is a taxable transaction? It is important to understand the types of transactions that are subject to tax in each state so a business can ensure compliance in every relevant state. Each state’s rules regarding sales/use tax will vary.

• Which exemptions does my state offer? It is important to understand the different types of exemptions each state offers, for both sales and purchases by the business.

Karen Stern (314-983-1204 or kstern@bswllc.com) is partner in charge of BSW Small Business Services, which provides small business tax and accounting services