Should You Collect Sales Tax Without Nexus?

To many people, under collecting sales tax seems like the worst case scenario when it comes to an audit. So is it better to collect in every instance as to keep from under-reporting? Well, no. If you’re not permitted to charge and collect sales tax, you can’t. Over-reporting is just as harmful to your business as your audit will still go poorly, you have to remit the sales tax back to your customers, and both your professional relationships and reputation are damaged. Knowing when to collect sales tax is key when running a business. Fortunately, there are many sources of information available to businesses looking to double check their sales tax responsibilities. From online databases to skilled tax professionals being an informed financial steward is easier than ever.

Unfortunately, sales tax law is always changing, so even what you believe to be true today could be different tomorrow. Because of this, routine research is needed to ensure that businesses are complying with sales tax laws, which is why many owners turn to automatic sales tax software  and outsourcing options. The Golden Rule Of Sales Tax, The golden rule of sales tax, or as close to a constant rule as sales tax has, is nexus. Nexus is the “physical presence” a company has within a state. Business activities that establish nexus vary from state to state, but include a physical building of some kind or certain types of employees and is discussed in greater detail here. As a business owner or financial employee is your responsibility to determine where and how your business has nexus in the states where you are doing business. If you determine that you do not have nexus then you are not responsible for collecting sales tax in that state. In short: no nexus, no sales tax. Sales Tax Permit Registration.

Once you have determined where you have nexus you must register for a sales tax permit. States require that you get a sales tax permit before you begin collecting sales tax. To register for a sales tax permit, go to your state’s Department of Revenue website or call. States want businesses collecting and remitting sales tax as sales tax goes toward paying for in state amenities. In some states the tax permits are free, while in others you will be required to pay a fee to secure one. Once you’ve registered, the state will tell you where and how often you should file a sales tax return be it monthly, quarterly or annually. It is important not to skip this step. Some states consider the collection of sales tax without a permit to be illegal. Sales Tax DataLink’s tax experts are here to help. If you have a question about nexus or if you are collecting the right amount of sales tax contact us and find out

Latest Articles

Sales Taxes and Sin Taxes

Sales Taxes and Sin Taxes

Sin tax A sin tax is a type of sales tax intended to discourage people from buying a particular item. An extra tax on the purchase of cigarettes, soda, or alcohol may be intended to keep consumers from buying as much if these sinful items -- oral least...

read more
The GAO on Remote Sales Tax Requirements

The GAO on Remote Sales Tax Requirements

The GAO speaks up on remote seller sales taxes The Government Accountability Office is responsible for providing important facts to Congress so they can make the best legislative decisions. They have just released a report on the question of sales tax...

read more