As a business owner, you will have to learn about several crucial information pertaining to how you should calculate your sales tax. In this small article, you will learn about some of the most essential aspects of calculating sales taxes for your business products.
What is nexus?
The word nexus is something that you shall notice everywhere a sales tax law or regular is explained. IT is really quite simple. The nexus is basically the commercial connection in any state. When you have a nexus for your business in a particular state, then it means that you will be liable to pay your taxes there. Thus, you will have to register and go through the entire procedure. Although the nexus has been generally referred to as a simple physical presence like a storefront and a warehouse. However, there are other definitions also which capture digital commerce and remote business also. These definitions basically focus on the same essential factors.
Factors determining the sales tax nexus
In spite of the fact that there are no standard policy for sales taxes or a standard definition of the term nexus, but the tax policies function in various different manners. There are some specific characteristics which are brought into play when you study the nexus and you will need to understand them in order to understand the different nuances of the singular’s state’s tax laws.
Where are you located?
In the event that you have any retail place like a storage house, or an office or warehouse with employees; basically any tangible sign of a busines then you shall have to register for the sales tax there.
What are the products that you sell?
The polices for sales tax will differ while depending on several of the products which you are selling. Things like whether the good is a physical item, service or a digital product and so on. You should read about the different tax laws on each of these products.
How do you sell your products?
There are some specific marketing and also selling practices which constitute the nexus in certain states. IF you are selling bricks and mortars, or web tools or do you have telemarketers, affiliate partners and so on. These factors will weigh in on your sales tax procedure.
How much are you selling?
In order to protect the smaller businesses from getting overtaxed by tax compliance, a lot of tax policies focus on a specific tax registration threshold. The common tax registration threshold is 200 transactions or over a hundred thousand dollars in sales in the previous financial year. Thus, if your revenues are over this threshold then you will have to pay sales taxes and otherwise you will be exempted.
Other tax exemptions
Exemptions are available on certain specific types of products. In case you see that you are eligible for any form of tax exemption then you should apply for tax exemption certificates in the states where you have registered yourself.
Exemption that are based on the types of product
Certain necessary items like food, medicine and even clothing are quite often exempted from any type of sales taxes. Besides certain products that cater to healthcare and even educational goods and services are exempted.
Exemption that is based on the use of specific products
In the event that certain products are meant for reselling in the same form in which it was bought then it can qualify as suitable for resale exemption. However, you have to be careful with this issue because a lot of retailers do not accept exemption certificates.
Exemption depending on the use of a specific product
In the event that you are selling to specific organizations then you may get tax exemptions. Items which are sold to the federal government of the United States are not taxed. Certain provisions like this also exist for the state and local governments also. Agencies like nonprofit organizations, charity agencies are also included in this list.
You may consider using an online sales tax calculator in order to easily calculate your sales tax.
There are specific rules regarding various sales tax policies in the United States. You need to understand all of these before you file your sales tax.