If you are going to establish your business in the United States than you must have the knowledge about US Sales Tax filing Process. Let’s see the basic things in sales tax filing for your business.
What is sales tax?
Sales tax is a tax that is imposed on the seller by the government authority for selling their products and services. The seller collects this tax from the customer at the time of the purchase.
Difference between Sales Tax and VAT
Retailers collect the sales tax from the costumers at the time of the purchase of the goods.
On the other hand, all the suppliers, manufacturers, distributors, and retailers collect the VAT at the time of the sale of the product.
As well as customers, suppliers, manufacturers, distributors and retailers also have to pay VAT on their purchases.
What do you mean by United States Sales Tax?
In the United States customers have to pay sales tax only once, at the time of the purchase of the final goods. The US sales tax is implemented at the state level. States and local authorities can set their own tax rates and tax laws.
When your company has an economic or physical presence in any state than you are liable for paying taxes, which is known as Nexus. The business connection is defined according to specific criteria for each state, which are different from those that apply to state tax.
Sales tax is imposed according to the following factors:
What kind of product do you sell?
Sales tax is imposed according to the type of product you sell. If you sell a physical product than you may have different sale tax policy? Or if you sell a digital item then you may have to follow different sales tax policy.
How many products do you sell in a year?
The quantity of the products you sell also plays an important role while imposing sales tax. If your annual business sales is lower than you do not require to pay sales tax. However If your annual business sale is higher and you earn enough profit from your sales then you have to pay sales tax.
From which place do you sell your product?
Some states also imposed sales tax based on these factors.
From where do you sell your product? Are you selling from a brick-and-mortar store or through an online store?
Do you sell your product by using telemarketers to call customers in a state or do you have any affiliate business marketing your product in that state?
Physical presence also plays an important role while imposing sales tax. If you have a retail store, warehouse, and an office or if any of your employee is living in the state than you are liable for paying sales tax.
How can a business handle US Sales Tax Filing?
Using a cloud-based accounting software is the best method to handle us sales tax. Vyapar, giddh, quick books, Horizon ERP are some of the best cloud based accounting software. The whole process — from charging the correct tax rate to collecting payment or issuing the proper bill will be automated with the help of this software.
All your records and important documents will remain safe online. A cloud based accounting software will handle all of your tax issues that saves your time so that you can spend more time on focusing on increasing the sale of your product.