By Christi Rains
The average consumer thinks very little about paying sales tax, it’s the price of being a citizen. The average business owner doesn’t think about PAYING sales tax on their purchases, it’s simply the price of doing business. Sadly though, when it comes to CHARGING sales tax, many business owners still don’t think about it, or at least don’t think about it properly.
Let’s start with the basics for the State of Texas, because that is where we are located (laws vary by state, but the basics stay the same). What exactly is a sales tax? “Texas imposes a sales tax on all retail sales, leases and rentals of most goods, as well as taxable services.”
Sounds simple, unfortunately the implementation of it isn’t. Start with the most obvious question; what is a ‘taxable service?’ Well, the term covers 16 broad categories on the Texas Comptrollers home page: Cable services, Data Processing Services, Information Services, or my favorite; Nonresidential Real Property Repair, Restoration, or Remodeling Services; it’s enough to make you want to forget about it.
What are some examples of how this craziness plays out? I’m glad you asked. Did you know: a lawn service charges sales tax based on the location of his home office, but contractors have to charge based on the location of the job site? A bakery that caters your next event does not have to charge sales tax if you pick up the cake, but if they hand you the utensils to eat that cake … you guessed it … they have to charge sales tax. These types of landmines crop up throughout the tax code.
As I said earlier, it’s enough to make you want to forget about it, but you better not do that. Do you know if you should be charging sales tax? If so, do you know if you should be charging sales tax for multiple jurisdictions? Failure to properly report your sales tax can result in fines and penalties that could quickly grow large enough to put you out of business.
The good news is that there is an easy solution. Find a professional you trust to help you. Start today looking for that accountant that can help guide you through these very dangerous waters.