Every business owner has a duty and responsibility to understand the assorted taxes their business must tend to as long as it continues to operate. Understanding these obligations before the entity is registered will alleviate any fear that a tax debt will be incurred. One of the hardest-hitting obligations, and often one of the most confusing to understand and keep track of, is any sales tax your business must collect, report, and turn over to the local or state government. I hope this blog article will provide insight into the confusing world of sales tax and help any business owner reclaim control over a potential runaway sales tax debt situation.

First and foremost, understand that every state and local municipality has its own sales tax rules. Some levy a sales tax only on goods sold, some on professional services performed, and some don’t levy a sales tax at all. If you are planning to start a new business, contact your local city, county, and state tax departments to explain what your services or goods sold will be and to secure clarification of what (if any) sales tax obligation(s) you may have. For example, here are a few of the more outlandish sales tax laws we have found:

• In Colorado, there is a “Napkin Tax” – lids, straws, and napkins are subject to a tax as “non-essential food packaging” items.
• In New York, there is a “Bagel Tax” – if your bagel is served sliced, it incurs a sales tax, though uncut bagels do not.
• In West Virginia, there is a “Sparkler Tax” – if you sell sparklers, the state levies a sales tax.

Though these are extreme examples, securing upfront clarification from all local tax agencies where your business falls within the jurisdiction is essential. And remember, tax laws change from year to year. Staying updated on these changes through your local business news and maintaining a strong relationship with your accountant year-round will give you a sense of security and confidence in managing your business's tax obligations.

Second, establish a checks and balances system to ensure your business maintains compliance with the various sales tax obligations. Double-check the percentages you should be charging per tax agency at the start of each quarter, and make sure your computer system is charging the rates appropriately.

Establish a standard operating procedure for running your sales and performance reports at the end of every business day and keep track of the sales tax you owe and to which agency. I have found that business owners are most successful in handling sales tax obligations by creating a separate bank account to be used solely for their ongoing sales tax obligations and transferring money to that account every business day in accordance with their daily activities. By doing so, they can prevent sales tax monies from being mixed in with operating capital.

Third, keep track of the dates your sales tax filing and payment are due to each tax agency. If you have a third party handling the filing and payment of the taxes, ask for proof that each return was submitted timely and monitor your bank account to track the proper payment withdrawal happens on time and in full.

As a business owner, I know you have one thousand and one things to monitor daily and weekly. While it may seem that tending to your business’ sales tax obligations to these recommended degrees is tedious, our goal is always to prevent a tax debt consequence before it happens. Remember that you are obligated to collect these monies from your customers/clients and hold them “in trust” to turn over to them. This is why the states, counties, and cities are relentless and highly aggressive when it comes to collecting past-due sales tax debt.

If you are reading this blog article after accruing a sales tax debt, remember that there is ALWAYS a solution, but it’s a situation you do not want to delay addressing. Every day a sales tax debt goes unaddressed, the more severe the problem becomes. Though each state handles tax debt differently, if pressed, criminal charges and penalties will be levied against those deemed personally responsible for the accrual of the debt. Reach out to the Golden Lion Tax Solutions team to help negotiate a solution on your behalf before the situation gets to Defcon 2 and a nuclear meltdown is imminent. The sooner you have a charted path to a solution, the sooner you can return your full attention to operating your business and pushing for profits.

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Trust. Protection. Wisdom.

Your future and your family deserve the right protection. Golden Lion Tax Solutions will be your advisor and confidant throughout the entire journey. We guarantee to offer you or your business best-case solutions for your tax debt. We are by your side every step of the way. Start now and get your life back.

For help with your tax debts, email contactus@goldenliontaxsolutions.com or call 833-LION-TAX (833-546-6829)

Disclaimer: There are requirements that must be satisfied in order to qualify for some of the tax solutions we discuss on our website. Not all of our services will be suitable for every client. Golden Lion Tax Solutions is here to help you find the most appropriate solution to fit your situation.