Should I Charge Sales Tax? Taxability Rules Explained

Описание: Hi everyone!

This is your weekly tax tip.

Today we are talking about determining the correct taxability treatment of your sales. Most taxing jurisdictions treat the sales of goods (i.e., tangible personal property) differently from the sales of goods.

We are not going to discuss nexus and registering to collect sales tax. If you are interested in that topic, check out our nexus series.

Generally, the sale of goods is taxable, unless it is specifically exempted from sales tax. Those exemptions can occur based on the item being purchased (for example, water is exempt from sales tax in some jurisdictions) or the exemption is based on who is purchasing the item (i.e., purchases by the federal government are not subject to sales & use tax).

The important thing to remember is that if you are selling goods, you must know if sales tax should be charged. You should also know which items are exempt from taxation and what documentation must be obtained to substantiate tax-exempt sales.

Services are treated differently. In Texas, for example, taxable services are enumerated. In other words, the taxing authority lists which services are taxable. As a business owners, you must determine if the services that you provide should be taxed. The Tax Code, taxing authority publications, tax authority representatives, tax consultants, etc. can help you with your determination. Once the determination has been made, you must be able to substantiate any tax-exempt sales in case you are ever audited. That may mean obtaining certificates, having clear and concise invoices where it is very clear what is being sold, etc.

The key takeaway is to research what the correct taxability treatment of the items that you sell (as well as the items that you purchase). Ignorance of the law is no excuse with the taxing authority. As a responsible business owner, the buck stops with you.

And that is your weekly tax tip.

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