4 Common Sales Tax Mistakes Business Owners Make And How To Avoid them.

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In life, few things are as certain as tax. It has become a permanent part of our everyday business life. There are different kinds of tax, like income, personal and sales tax.

Only a small number of people are exempted from the obligation and responsibility of paying tax. Not paying attention to this responsibility can cost your business much more in penalties.

Sales tax are constantly changing as all states now require companies that have nexus, or some kind of presence that triggers legal obligation, to collect and remit sales tax. This was after the Supreme Court determined in the wayfair nexus case that an out-of-state seller can have economic presence in a state where it has no physical presence, and can be held legally accountable for collecting tax.

While most established businesses have mastered the art of managing their sales taxes effectively, other businesses make some costly mistakes that come back to haunt them.

Effective management of sales taxes requires efficient planning. This is because the tax laws regulations are a little complicated as different laws apply to different jurisdictions.

The following are five common sale tax mistakes that business owners make. In this article, we shall discuss those mistakes and offer tips on how you can avoid them.

1.  Late or no Filing 

Many small businesses make the mistake of not knowing, or totally forgetting the time required to file their sales taxes.

Different states have different times for proper filing. In many states, the sales taxes must be filed on or before a particular date every month. In these states, failure to comply attracts stiff penalties. In other states, filings can be done after the required dates without penalties.

In those jurisdictions that insist on meeting deadlines, the penalty may be as much as 5% per month. Non-payment of filing will attract a higher percentage of penalties.

Therefore to avoid penalties and fines for late payment in filing sales taxes, small business owners should take note of the tax laws of the various jurisdictions where their businesses are located.  

Not Filing Where Products Are Sold

A sales tax by its name shows that it is a tax collected from the sale of a product. According to Wikipedia,

A sales tax is a tax paid to a governing body for the sales of certain goods and services. Usually laws allow the seller to collect funds for the tax from the consumer at the point of purchase.

Many small businesses do not avert their minds to the fact that they are liable to pay taxes everywhere their products and services are sold and not only in the place where their business is located

Accordingly, every business is required to calculate and file sales taxes in all the places where its products and services are sold. Many small businesses have fallen into this mistake and incurred avoidable penalties.

   Not Consulting A Tax Expert.

Many small businesses want to save costs by trying to personally manage most aspects of their business.

But filing and complying with the various tax laws and regimes can be complicated. If it is mismanaged, the consequences may see the end of the business.

Employing the services of a tax expert will ensure that you are never behind in filing your sales taxes thereby saving you much-needed cash in the long run.

 

Failing To Use An Updated Sales Tax Software.

 

Our memories as human beings are not reliable. We tend to forget deadlines, targets, and other details required to efficiently file sales taxes.

 

But thankfully there are sales tax software designed to help companies prepare and file tax returns as at when due.

 

Tax laws are always being reviewed, and so it is important to ensure that your software is up-to-date. Ensure that your app is updated to comply with the new regime.

 

Many business owners fail to update their software, and are shocked to find that they ended up filing the wrong tax. And of course, you know that wrong tax filing can attract fines and unpleasant penalties.

 

Conclusion:

 Every business owner wants to make profits at the end of the financial year. Avoiding fines and run-ins with the law can hinder you from accomplish your goal of growing your business.

 

To avoid these common sales tax mistakes, use hire a professional tax professional, use an up-to-date tax software and pay attention to the rules in your jurisdiction.