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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.
