As a business, you usually have an obligation to collect sales tax. While it can get really complex, especially with all the new law changes that impact nexus and states grasping at straws for revenue, the processes behind actually registering to collect sales tax are pretty straightforward. If you think about it, states want your money and don’t want to make it difficult for your business to get up and running in terms of paying sales tax.
Getting through the red tape to start your business doesn’t have to be complicated. Determine Tax Liability Jurisdictions. The first step to registering to collect sales tax is to make sure your company actually needs to collect sales tax. When you’re starting a new business, make sure to think of all the different ways you might be creating nexus with different states. While you might not have a physical location in a state, laws might create nexus through other ways, like “Nexus and Affiliate Marketing”. Contact Jurisdictions While each state has its own laws about sales tax, they all have a state department that deals with sales and use taxes.
By talking with your state’s sales tax department, you can find out what exactly you are responsible for as a business owner. Be sure to do the same for other states where you might have nexus. Be sure to ask questions such as if the state is “Destination and Origin-based Sales Tax” origin or destination-based sales tax and how you need to calculate collections. You’ll also want to find out if there are exemptions for your business or certain types of products you carry. Register Your Business.
The final step is to actually get your documentation that you’re legally allowed to collect sales tax. Without it, there might be penalties if you collect sales tax so make sure to do this step before you open up for business. Do this well in advance of opening day, because the process can take a long time in certain states.