Help with your Sales Tax Return

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Go To Great Panes, Kathryn Maloney ©2012
This post is copyrighted–you do not have permission to repost this content elsewhere but you are welcome to link to it if you’d like to share the information.

I’ve seen a lot of posts recently from folks wondering about how to fill out sales tax paperwork, and while every state’s sales tax rules are different, this is generally how sales tax reporting goes (and it’s totally separate from your income taxes for your sales).

This is not a be-all end-all list, it’s just to help you get a feel for what is required on your sales tax return–your paperwork may include more or less details or have them in a different order. (Don’t know if you should be collecting & remitting sales tax? See here: Sales Tax)

Please, please, please check with your state to be sure this is accurate for your state before submitting your sales tax return–that includes reading the sales tax return instructions or calling the state if you need to, to confirm you understand what needs to be reported & how. I promise once you’ve done it once or twice it won’t seem so overwhelming. 🙂

~ Gross income ~

Start with your total income (gross) from the business:

  • Sales to in-state buyers,
  • sales to out-of-state/country buyers are included too,
  • include the money you received from buyers that was listed as shipping and/or handling,
  • this amount usually does not include sales tax you collected as that is not your income, you are just holding it for the state until you finish the sales tax form & remit the money collected.

you subtract

Amount of income on which sales tax is not due:

  • Out of state transactions is usually the biggest chunk of that–orders shipped to a buyer in another state (the one sales tax rule that is true for all states is that you don’t collect sales tax on interstate transactions),
  • items which aren’t taxed in your state (often things like clothing & food aren’t taxed),
  • some states don’t collect on shipping or the actual shipping portion of what you collect as shipping/handling–if that’s the case for your state, that portion of the shipping collected would be there too*,
  • items sold at wholesale (usually to someone who provided you with their tax exempt number/paperwork if they were in-state buyers),
  • and whatever else, if anything, your state says isn’t included in your gross income as sales-taxable.

+ you add +

Items you purchased on which sales tax was not collected but is due:

  • purchases made using your business exemption that you took some/all of the goods out for personal use (use the dollar amount you should have paid sales tax on–a partial amount if only some goods were used for personal use),
  • your personal purchases online, by mail or through other methods where the seller didn’t collect it from you but you would have owed sales tax if purchased in person at a store locally.

+

and adjust
for improperly paid sales tax
+

You also need to compensate for sales tax under or over paid to other jurisdictions including (be sure to keep receipts/records for these too):

  • Sales tax you under-paid–in many states if you bought goods in a 6% district but took them home to use them in an 8% district, you’ll owe that 2% of the purchase price to the state,
  • sales tax you over-paid–if you bought goods in a 10% district but took them home to use them in an 8% district, you might be reducing the tax you remit to the state by 2% of that purchase’s price,
  • taxes paid to another state when you didn’t keep/use the item in the other state.

= Leaving you with =

Then you have left what the state wants sales tax calculated on. For some states there’s one sales tax rate no matter where in the state the goods where shipped, other states base the rate on the seller’s address (origin-based sales tax), other states it’s the buyer’s address (destination-based sales tax)*.

So that’s the basics. Be sure to find the instructions for the sales tax return form on your state’s website if you are having trouble figuring it out even if you’re filing online–usually the instructions can clear up any issues you are having.

*If you need help finding out if your state taxes shipping or where the tax base is, see here–look fo a link to that info on your state’s website or for FAQs, publications etc that might cover that topic if there’s no direct link: Sales Tax & Business Registration Help

Go To Great Panes, Kathryn Maloney ©2012
This post is copyrighted–you do not have permission to repost this content elsewhere but you are welcome to link to it if you’d like to share the information.

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