REGISTRATION FOR SALES AND USE TAX
All business entities, including LLCs, corporations, and non-profit corporations are required to register for sales and use tax. Your company will risk government penalties and fines for failure to comply with the proper collection, reporting, and payment of sales and use tax. To register for sales and use tax, you will need to obtain your EIN, and fill out the registration form on your State’s Department of Revenue website.
Sales Tax
Sales tax is a tax paid to the government on the sale, transfer, or exchange of taxable goods or services. Sales tax is also called retail tax as it is usually added to the sales price of the product or service and collected at the time of purchase. As a rule, the purchaser pays the tax and the seller collects it as an agent for the government. The majority of states require their residents to pay sales taxes. The only exceptions are Alaska, Delaware, Montana, New Hampshire, and Oregon.
Generally, sellers (business entities) are responsible for calculating and collecting sales tax at the time of purchase. The collected sales tax must then be held until the seller is due to file a tax return and transfer it to the appropriate tax authorities. Typically, sales taxes are remitted to the government on a monthly basis. The monthly filings can be quite burdensome; however, it is a criminal offense not to report taxes properly.
Use Tax
Use Tax is defined as a tax on the storage, use, or consumption of taxable goods or services on which no sales taxes have been paid. Use tax is a complementary tax to the sales tax and does not apply if the sales taxes were charged. Usually, use taxes are charged if purchases were made outside the taxing jurisdiction but used within the state.
There are two types of use taxes – Consumer Use Tax and Vendor/Retailer Use Tax.
What is Consumer Use Tax?
Generally, consumer’s use tax is imposed on the storage, use, or consumption of taxable items or services on which no sales tax has been paid. A purchaser is obligated to pay a consumer use tax on any taxable tangible personal property stored or used in their state. If the purchaser has already paid the applicable state sales taxes, no use tax is collected.
Examples of transactions subject to consumer use tax:
• Purchases from mail-order companies not required or registered to collect sales tax from the state of delivery
• Purchases from an out-of-state or in-state company that is required to collect sales tax but does not
• Online purchases from vendors who are not required to be registered and sales tax is not charged
• Profits received from services provided out-of-state.
What is Vendor/Retailer Use Tax
Vendor/Retailer Use tax is very similar to a sales tax. The difference is that Vendor’s use tax applies to sales that are conducted by a vendor located outside of the state but is registered to charge tax in the state of the sale. So, if a vendor charges a customer seller’s use tax at the correct rate, the customer will not be required to pay a vendor’s use tax. Basically, the out-of-state vendor assists their customers with the payment of the proper use tax. To determine the tax rate amount to be collected, a vendor needs to know which state they will be shipping their goods to.
Can BizStarter help me register for sales and use tax?
Yes, we can. BizStarter has been assisting business owners with applications for Sales and Use Tax registration, Certified copies, Domestication, Certificate of Good Standing, Apostille and authentication services, and much more since 2016. We can explain what taxes you need to register for, based on the location of your business and states where you do business, file all the necessary paperwork on behalf of your business for a minimal processing fee. By trusting BizStarter with your business compliance paperwork you will save your money, time, and peace of mind.
