Small Business Sales Tax


As a small business, you want to ensure you are correctly categorizing transactions and sales appropriately for tax purposes. Today, we talk about the basics of sales tax for products and services especially if you operate in multiple states!

Photo by Ruthie on Unsplash

What is sourcing?

Sourcing is where your clients calculate sales tax. Local sales tax occurs at local levels as well as applying state tax sale. Two types of sourcing are recognized: destination-based and origin-based. As you can guess, destination-based means sales tax is charged at the sale's destination, where origin-based means sales tax is charged where the item originates. Ensure to check state regulations to make sure you charge sales tax appropriately!

Virginia's tax nexus

In Virginia, we have what is called a tax nexus, meaning you have a "significant presence" in the state. This can be anywhere from having a place of business in Virginia, leased property, a minimum number of merchandise deliveries within a year, or even certain types of advertisements! Recently, thanks to the South Dakota v. Wayfair Supreme Court ruling, the rules have changed because of the growing e-commerce landscape. Ask your local tax expert for more information on when you should charge sales tax as a Virginia business owner!

I'm a service, how do I calculate sales tax?

The good news for Virginians who have service businesses is that services are generally not taxable! However, if the service you provide includes selling products in any form, you will need to address sales tax on products.

if you have more questions on how to apply sales tax for your business, contact us today!

Resources

PracticalAccountingVA.com

Firmofthefuture.com

TaxJar.com

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