All About Sales Tax

Person Buying Something

Sales tax is just part of consumerism in our society - you probably don’t even think about it much since we are all so used to paying it each time we shop!

But if you own a business, you may be wondering… “Do I need to charge sales tax to my customers?” And “What do I do with the sales tax I collect?”. Sales tax can be seriously confusing, so let’s go over exactly what you need to know!

What Exactly is Sales Tax?

Sales tax is the tax added onto the purchase of consumer goods. Not all states in the United States charge sales tax. For example, Oregon is a state that is exempt from sales tax. In the states that do charge sales tax, the business adds the sales tax charge to the goods they are selling and then the business turns the sales tax over to the state. Sales tax rates range from state to state.

Do I Need to Charge Sales Tax?

If you are selling physical, retail goods - you need to be charging sales tax. Some exceptions do occur though. If you are purchasing wholesale items that are going to be resold, you most likely will not need to charge sales tax. If what you are selling is actually raw material that will be used to make other goods, you don’t need to charge sales tax. You also don’t need to charge sales tax when you are selling items to non-profits. What needs a sales tax charge and what doesn’t does vary from state to state, so make sure to check about the area you live in. Don’t forget to purchase a sales tax permit so you can legally charge sales tax to your customers!

*Tip: If you are a photographer, and you sell a package which includes a physical item like an album or prints - you now need to charge sales tax on your whole sale!

Sales Tax and Out of State Sales

If you are selling to a different state, the rules for sales tax changes a bit. If your business has a physical address in a specific state, then you definitely need to be charging sales tax to your customers for that state. If your business does not have a physical address, then you need to check the laws of that state to determine if you meet their criteria (many requite it after 100 transactions or $100,000 in sales). This is especially important in the world of e-commerce.

Just recently, many states have started to collect sales tax from out of state sales which is a HUGE change. Sales tax rates also vary from state to state, so the easiest way to avoid the mess of calculating different sales taxes is to invest in an online shopping cart service like Shopify. The service calculates the sales tax charges for you. We love TaxJar also for automatic sales tax calculations and filings!

How do Small Businesses Pay Sales Tax?

Depending on the state, you will most likely either have to pay sales tax monthly or quarterly. Businesses are required to submit a sales tax return form, normally completed online. Along with this, you need to report to the state your total sales, taxable sales, and the amount of tax due. Turning sales tax over to the state is something you can not skimp on! There are serious penalties if you don’t do this correctly.

Have More Questions?

If you have more business tax-related questions, don’t hesitate to reach out to us! We are happy to help and will point you in the right direction for resources.

Tips for Collecting Payments from Your Clients Faster

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Why did you start the business you did? If you are like most of us, you wanted to combine your passion with your job so work could be something that you truly love. But, part of the reason for working is to earn money — and when you work for yourself, you have to worry about collecting payments from your customers. Collecting payments can be well… a little tricky! Sometimes clients don’t pay on time or when you need them to. Here are some tips that we have learned to help collect client payments on time.

Shorter Payment Terms 

If you don’t already have payment terms for your services, you should! Payment terms tell your clients how and when they are supposed to pay you. Having shorter payment terms is usually better - we recommend Net 7, and a 50% upfront deposit for projects. It allows you to get your money quicker and therefore allows you to be able to pay your own bills in a quicker time period. It also gives your clients less time to forget that they are supposed to pay you. Sometimes out of sight is out of mind. 

Have a Late Payment Fee

So, you set up your payment terms, but how do you reinforce them? A late payment fee. It gives your clients an incentive. Most people don’t want to pay any more money than they have to, so a late payment fee is a great way to ensure that your clients pay you on time. Just make sure that your late payment fee is clearly written out in your payment terms. We recommend a flat fee, or a percentage of the invoice total. It can be as simple as a 10% late penalty per month past due.  

Offer Various Methods of Payments

If you want your clients to pay you in a timely manner, make it easy for them to actually make the payment. You can do this by offering multiple methods of payment.  You can go the old fashion route like having your clients pay through cash or check, and you can also offer them an electronic ways to pay. Some of the more common electronic payment systems used today include ACH, PayPal, Stripe, and Zelle. Your client will thank you for making it easier for them, and for allowing them to earn those credit card points! ;) 

Have Consistent Follow Up Emails 

Life gets busy and things get forgotten. Unfortunately, sometimes people forget to pay bills. An easy way to make sure that your clients pay you on time is to remind them through consistent follow-up emails. These emails can be rather simple. Just let them know when their payment is due and how much they owe. If it is getting close to the due date, send them an email that gently reminds them of the late payment fee. 

Collect that Money! 

By following these simple tips, getting paid by your clients on time will be a lot easier. Which in turn, will make it easier to pay your own bills and keep your business cash flow on track. If you have any other questions related to your business that you think we could help with, don’t hesitate to reach out to us through our contact page

Why an Accountant is Worth Your Dollar

Accountant

As a business owner, you must eventually decide which tasks to do yourself and which tasks to delegate.

Like most people, you are probably an expert on some topics but not ALL that relates to your work (and you shouldn’t have to be!). There are certain things that you may need to outsource - like your business bookkeeping. So… who do you rely on to help you with your finances? An accountant. Let’s go over exactly what an accountant does and how they can help your small business THRIVE.

What is an Accountant?

In short, accountants are experts on business finances. They are vital to the organization of your monthly financials, analyzing your cost of operations, looking at your investments and profits, and auditing any existing financial statements. Based on their findings they will put together financial documents and give financial recommendations specific to your business.

They Live and Breath Numbers

Accountants benefit and help your business grow in so many ways. No one knows finances as an accountant does - they truly live and breathe numbers. Whether you are just starting out, have been running a business for a while, are a huge business or a small one, you will always need an accountant on your side.

They Help Make Business Plans

At the start of your business journey, they can help you write a business plan. They will take a look at the niche you are in, employ the appropriate software, and then make financial recommendations. Without a good business plan, you may have a harder time getting a loan. Banks like to look at numbers and research. When an accountant is behind these numbers, not only will you have all the necessary information available to you but banks will also be more likely to trust the information given.

Keeps Your Finances in Order

An accountant will keep your finances in order. They know the proper procedures and processes for keeping track of your books. They will even look at your cash flow and help you optimize it. Things won’t go missed (like tax write-offs!) when an accountant is helping you out.

They Help You Make More Money

Accountants are all about making you more money! They want to see your business be as successful as possible. Their recommendations are for the health of your business and can include areas to cut costs, areas that are making you the most profit, and how much to pay yourself.

Saves You Time

How much time do you spend trying to keep your business's finances in order? Our guess is a lot - especially if you are waiting until tax time! By outsourcing your monthly bookkeeping to an accountant, your highly valuable time can be put to other important tasks to grow your business.

How Can InLine Accounting Help?

At InLine Accounting, we offer remote and ala carte bookkeeping and advisory services. We take the guesswork and stress out of your business bookkeeping. If you have any questions, please feel free to reach out to us on our contact page and we’d be happy to help!