Collecting & Filing Sales Tax for Your Business

“So do I need to worry about collecting & filing sales tax for my business? 🤔 And if so – what percentage or amount do I need to charge?”

Hoo boy – this is actually a surprisingly complicated question 😬

Here’s why:

𝗘𝗮𝗰𝗵 𝘀𝘁𝗮𝘁𝗲 𝗶𝘀 𝗱𝗶𝗳𝗳𝗲𝗿𝗲𝗻𝘁

There is no universal federal sales tax rate – sales tax is determined by each individual state, therefore the rules and rates and filing frequencies differ from state to state.

And it’s not just state taxes – there are also local taxes (like county and city) to factor in as well.

🗺️ 𝗔𝗹𝗹 𝗽𝗵𝘆𝘀𝗶𝗰𝗮𝗹 𝗹𝗼𝗰𝗮𝘁𝗶𝗼𝗻𝘀 𝗼𝗳 𝘆𝗼𝘂𝗿 𝗯𝘂𝘀𝗶𝗻𝗲𝘀𝘀 𝗮𝗿𝗲 𝗮 𝗳𝗮𝗰𝘁𝗼𝗿

What if your business is located in Ohio, but you have a warehouse located in Pennsylvania? Or a salesman located in Illinois? Did you travel to Kentucky to sell your goods at a weekend convention?  That all has an effect, too.

(And don’t get me started on the confusions and complications of drop-shipping and Amazon Fulfilment)

📦 𝗦𝗼𝗺𝗲𝘁𝗶𝗺𝗲𝘀 𝘄𝗵𝗲𝗿𝗲 𝘆𝗼𝘂 𝘀𝗵𝗶𝗽 𝘁𝗼 𝗶𝘀 𝗮 𝗳𝗮𝗰𝘁𝗼𝗿

While some states require you to collect sales tax based on your business location, most states are “destination-based. Therefore, you need to factor in the buyer’s ship-to location.

💰 𝗬𝗼𝘂𝗿 𝗮𝗺𝗼𝘂𝗻𝘁 𝗼𝗳 𝘀𝗮𝗹𝗲𝘀 𝗮𝗳𝗳𝗲𝗰𝘁𝘀 𝘁𝗵𝗶𝘀 𝗮𝘀 𝘄𝗲𝗹𝗹

Depending on the state, if you’re physically located in State A and selling in State B, you don’t need to collect sales tax in State B until you cross a certain sales total minimum (like $100k in sales)

So again – this simple question doesn’t have a simple answer 😅

However, here are a couple of amazing resources to help you figure this out for you and your business: 

This article from Bench about sales tax basics:

This amazing state map tax tool from Taxjar:

This video walks you through how to set up sales tax in your Quickbooks Online account:

Hopefully, one or more of those resources can help clarify the sales tax needs specific to you and your business! 

What about you?  How do you handle sales tax management in your business?  I’d love to hear your favorite tricks + tools!

… Or maybe right now you’re thinking, “I’m not even up to date on the BIG things, like client payments … let alone sales tax rates!!” 😓

No worries – We’ve got ya covered ❤️ We help our clients with this kind of stuff, from catch-up services to monthly management, on a daily basis. And we’d love to help you, too!

Kerry Postel – Founder CEO Principal

Abacus Business Solutions

Has Higher National Diploma in Business and Finance, Certified in QuickBooks, Member of American Institute of Bookkeepers, and over 20 years of bookkeeping experience including construction, travel, restaurants, events management, and other various professional services.

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