Managing sales tax collections is crucial for both the local government and an individual business that requires collecting the tax. While every tax is different, sales tax collections can be similar or extremely different. It is important to understand the requirements of the state in which your business operates to properly collect.
Sales tax collections are most often collected by state and local governments, although the Internal Revenue Service also collects some tax revenues from businesses. Generally, all states and municipalities to collect taxes on goods or services, with some states including a special sales tax on groceries.
Also, five states – Alaska, Delaware, Montana, New Hampshire, and Oregon – exempt certain transactions from tax liability, which include alcohol sales and purchases by mail. In some cases, these five states may share revenues with other states.
Regardless of which states or municipalities collect the tax, many small businesses choose to use specialized small business accounting software to help them. With so many options out there, it is important to choose a software system that is easy to use and provides you with the functionality you need.
Small business accounting software should allow you to determine your tax obligation and account for all tax payments. In many cases, business owners choose a simple solution, such as the IRS’s online e-filing program, or the simplified version of the e-file called IRS EIN. For more knowledge on the matter, we recommend that you study the resources presented at this sales tax bond Texas write-up.
However, many small businesses are opting for more functionality. In this case, software developers and companies provide solutions that allow small businesses to work with multiple states and/or federal tax collections. Using this capability allows small businesses to expand their tax knowledge.
Accountants that use this capability will also be better equipped to handle audits from both state and federal tax agencies. When small businesses begin to implement their e-filing systems, they should first determine which tax jurisdictions they will be submitting their tax returns to.
While many use the same tax jurisdictions that their parent company uses, it may still be necessary to submit tax returns to individual state tax jurisdictions. Using compliance software that enables you to determine which jurisdictions your tax returns must be submitted to will make this task much easier.
After you have chosen your tax jurisdiction, your system should include a feature that allows you to enter sales tax payment data. This allows you to manage your remittances automatically, as well as ensure that all payments received are properly filed.
If you are using an e-file system that does not include this capability, you will still be able to submit your remittance to the appropriate tax authority. If a customer sends you a check and then fails to remit the tax, you will be able to obtain it from the electronic payment system used by the customer.
Software vendors who provide e-filing systems for small businesses should allow customers to select which tax jurisdictions they want to file their returns in. If they do not allow customers to select their tax jurisdictions, the software vendors should be able to supply a list of the states in which the customer will need to remit sales tax.
In most cases, these vendors will also be able to supply contact information for state tax enforcement agents. The software vendors should also allow the customers to download a copy of the sales tax compliance calendar for each state that the business is required to remit to.
This calendar will provide the business with the instructions, forms, and instructions for filing its returns. Most importantly, the software vendors who provide sales tax compliance solutions for e-file systems should allow the end-users to print out a receipt, if required.
This will help ensure that the tax-management process is completed promptly. Small businesses often find it difficult to comply with the many procedural requirements that are required of them.
If your compliance solution includes the ability to print a receipt, you can expect that it will substantially simplify the tax preparation process on your part.