Sales and Use Tax

Sales and use tax compliance is an area that most small businesses need to pay constant attention to. States, counties, cities, and other jurisdictions change their laws frequently as to which products and services are subject to taxes. Filing requirements depend on sales volume, and as you grow, you may need to pay sales tax and file sales tax returns more frequently.

If you sell your items in more than one state, you may have multiple sales tax obligations when it comes to collecting, paying, and filing. Nexus is the concept of whether you have enough of a business presence in a state to be subject to their sales tax collection and filing requirements. Nexus can be triggered by real estate ownership or Amazon warehouse use, where an employee works, the number of sales transactions, a dollar amount of sales to customers residing in a state, and many more criteria.

Your accounting system needs to be set up correctly to capture all of this information. But you also need someone who frequently checks for any changes in the laws of each jurisdiction where your business operates.

Exceptions must be managed as well. Some customers you do business with may be exempt from sales tax, so you need to collect exemption certificates from them and handle their exceptions. Plus, its not just the sales side of the business thats affected. Purchases may need to be disclosed as well due to use tax compliance.