Need Some Deductions for 2011?

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Updated for 2011

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State Sales Tax

If you sell merchandise at retail, your state, and even local government, may require you to collect sales tax from customers who live in your state when they make a retail purchase from you.

Sales tax returns are generally filed with your state and local governments monthly and the tax remitted along with the return.

The sales tax permit (or license) has a number assigned to it. This number generally appears on the sales tax return sent to you by your state (and local government).

Who Must You Collect Sales Tax From?

As a general rule, sales taxes are paid by the ultimate consumer.

You're generally not required to collect sales tax on the following types of sales:

Out-of-state sales:
- Generally, if you sell merchandise to anyone who resides outside of your own state, you do no have to collect sales tax.
Sales for resale:
- You're not required to collect sales tax from a reseller of your merchandise.
- If your merchandise is resold by a reseller of your merchandise, the reseller is required to collect the tax.
Services: Generally, there is no sales tax on the sale of services.

DON'T GET STUCK having to pay sales taxes you don't owe!

Taxable Sales:

Sales taxes are generally assessed on taxable sales. These are retail sales of merchandise to consumers within your state.

Nontaxable Sales:

However, you are not required to collect sales tax on nontaxable sales. These are generally out-of-state sales and sales to resellers of your merchandise.

If you sell merchandise to a reseller of your merchandise be sure to get an Exemption Certificate from the reseller and keep it on file.

Here's why:

Should you be selected for a sales tax audit, the auditor may ask you to pull a selected number of sales invoices for a certain period of time.

Then, from the sales invoices where no sales tax was collected (nontaxable sales) the auditor may ask you to provide an Exemption Certificate for the particular reseller indicated on the invoice.

For each nontaxable sale that you don't have an Exemption Certificate for, the auditor may reclassify the nontaxable sale as taxable and assess sales tax on the sale.

Based on a statistical sampling of these invoices covering a selected period of time, the auditor may project an estimated sales tax deficiency.

This can end up costing a bundle!

To cover yourself:

Get an Exemption Certificate from every reseller.
Keep two separate sales accounts:
- One for taxable sales.
  - Monthly taxable sales reported on sales tax returns should equal the gross sales on the invoices recorded in your books for the same month.
- One for nontaxable sales
  - For all nontaxable sales, make sure you have an Exemption Certificate on file from all resellers.

Tax Identification Numbers: State Withholding Number; State Unemployment Account Number

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State Sales Tax

Who Must You Collect Sales Tax From?

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