Sales Tax
Sales taxes are imposed on the sale of goods and services by
the state and local governments
Depending on the location of your business, different goods and services
may or may not be subject to tax. Some states may not impose sales taxes
on groceries, for instance. In general, whether the customer is aware
of it or not, the majority of businesses must pay sales taxes on their
gross receipts.
Sales taxes are imposed on the total amount of capital a business
makes
No deductions are allowed for the cost of the goods or services to the
business. If your business sells food and drink through vending machines,
the sales tax is imposed on the entire amount of money obtained through
their usage. You cannot deduct the amount you spent on the snacks that
you put into the machines, the cost of owning and maintaining the machines,
or any other business expenses. That is why sales taxes are also referred
to as gross receipts taxes. They are a tax on the amount of gross receipts
that your business takes in.
Sales taxes don't just apply to merchandise.
Many service businesses are now required to pay gross receipts taxes on
the money they take in from providing services. Depending on how the state
law is written, this tax may not be allowed to be passed on from the service
provider to the consumer. Just about everyone is used to paying sales
taxes above the advertised price of an item. But when you pay your lawyer's
bill or your doctor's bill you will not see an amount on it for gross
receipts taxes. Usually these service providers are required to pay taxes
on the amount of money they receive for the services they render. But
they may be prevented from passing it on to the consumer as an extra charge.
The fact of the matter is the consumer pays no matter what. It is just
a question of whether they know that part of the fee is really going to
pay a state sales tax.
There are exemptions to the sales tax
If we refer back to the vending machine example we spoke of early, the
business owner would normally provide a tax exemption certificate to the
business from which he buys the food and drink for the vending machine.
The exemption would allow the first seller of the products to not pay
the sales tax on them. By this strategy being implemented it eliminates
the possibility of the sales taxes being collected twice on the same items.
Also non-profit organizations are exempted from paying sales tax. They
too can provide businesses with tax exemption certificates that enable
them to purchase goods without paying sales tax on them. Or in the case
of non-profit medical clinics, the services they provide would not be
subject to sales tax.
What goods and services are subject to gross receipts taxes can be checked
with your state's taxation and revenue department. They will also be able
to inform you of the process for claiming exemptions and when and to whom
exemptions apply.
|
