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Sales Tax

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What Is Sales Tax Accounting?

Sales tax accounting is a necessity for many business owners, particularly those who own retail establishments, restaurants, and other companies that sell physical products to clients.

If your business has presence in a state with sales tax, you are legally required to collect sales tax from customers. For your own records, it is important to keep track of the sales tax you take in each year. You should also record any sales tax you pay to wholesalers or other sellers.

This, in short, is sales tax accounting.

There are two main types of sales tax:

  • Sales tax paid by customers

  • Sales tax paid to vendors

Sales Tax Paid By Customers

Sales tax your customers pay to you is not part of your small business revenue. You have a sales tax liability.

Businesses are custodians of these funds, and are responsible for remitting them to government authorities in a timely manner.

Sales Tax Paid to Vendors

Sales tax that you pay for goods and services necessary for operating your business are considered an expense, not a liability.

Typically, the total expense associated with a purchase includes both the price of the product and the sales tax. There’s no need to separate sales tax you paid during the year from your overall expenses.

Why Do I Need a Sales Tax Accountant?

Sales tax accounting can be complex, particularly with the rise of e-commerce. There are a number of legal precedents that determine how much – if any – sales tax needs to be collected when a business sells across state lines.

As the world continues to evolve, online sales tax regulations are apt to change rapidly. It can be difficult to stay abreast of the latest news without assistance from an expert.

We’re here to help! With years of experience in the sales tax accounting industry, First Tax Service provides a variety of services to ensure that your California business is fully compliant.

Our services include, but are not limited to:

  • Reconciling sales tax rates based on state and local tax codes

  • Applying exemptions for specific products or services

  • Tracking changes in tax codes

  • Checking sales records

  • Implementing appropriate tax accounting policies

  • Preparing tax returns and reports for small business owners