Sales Tax Simplified: 3 Key Questions to Unravel Your Small Business Tax Obligations

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Expert Danny Wright from Peisner Johnson discusses the intricacies of sales tax and how it applies to business owners. Core concepts are discussed including determining if a business is subject to sales tax, identifying 'nexus' states where sales tax may be applicable, and understanding which products or services are taxable. Danny highlights the impact of accidental non-compliance, discussing the pitfalls of not remitting the sales tax charged to customers. He also notes complications caused by remote workers or drop-shipping in different states and explains the responsibilities under new marketplace facilitator laws. Finally, Danny explains how their firm offers free consultations to help businesses understand their unique responsibilities and potential liabilities.

[00:00 - 09:24] Introduction to Sales Tax for Business Owners

• Danny emphasizes the critical nature of sales tax as a gross receipts tax, which is independent of business profitability. 
• He underlines the significance of setting up tax collection processes and the peace of mind it brings, despite initial administrative costs.
• Three main questions are addressed: What is the sales tax nexus? Is my product or service subject to sales tax? Who is responsible for handling sales tax?

[09:24 - 20:30] The Impact of Sales Tax Nexus on Business Operations

• Sales tax is due based on the 'ship to' address, not where the product is sold or the business has nexus.
• A single small transaction does not automatically trigger nexus unless it exceeds the state's established threshold.
• Sales tax responsibility begins only after reaching the threshold, and states often offer a grace period for businesses to register and start collecting tax.

[20:54 - 33:55] Invoicing and Pricing in Taxation

• Danny discusses the complexity of sales tax, highlighting that a business might have both taxable and non-taxable revenue streams.
• How businesses invoice their customers can affect taxability.
• Businesses with nexus in multiple states may still find that their products are exempt from sales tax everywhere.

Quotes:

"It's super important to pay attention to [sales tax] because it doesn't care about profitability... it really is something that can get you in trouble in a hurry in the future if you don't get an 

"Once you hit [an economic nexus] threshold, that is when your responsibility begins... a lot of the states offer a grace period... that's part of what you can pay attention to when you're reviewing your nexus." - Danny Wright

"If you collect tax from a customer, it's not yours. And never keep it because you're going to be dealing with questions around fraud in the future." - Danny Wright

Connect with Danny!

Email: dannyw@pj.tax  

Website: https://peisnerjohnson.com 

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Podcast Host: Mike Jesowshek, CPA - Founder and Host of Small Business Tax Savings Podcast

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