It might seem to you that the calculation of sales tax is a simple procedure; all you need to do is take a taxable product’s sales price and then multiply it with the present rate of sales tax. It shall seem incredibly easy to apply this procedure on the calculation of sales tax on certain services. Thus for instance, if a certain product is priced at $10 and the rate of sales tax is at 8 % then the total amount will be $10.80 with 80 cents included as the sales tax amount.
However, the procedures that are involved here are not so easy or hassle free. The main issue lies in figuring out the various things which require taxation and then the calculation of the rate that shall depend upon how you are operating your business. This may require you to learn the specific rules which are in practice in over twelve thousand jurisdictions all over the United States.
This small article will help you get some finer details about calculating sales tax.
A Primer for Understanding Sales Tax
The sales tax is just a tax which consumers will need to pay when they are buying any type of taxable goods or services. The seller will need to collect it and then remit it to state and local authorities. The state and local jurisdiction shall have specific physical locations where the taxes are collected. This tax mount is then used by the local authorities for funding different types of government operations.
Of course, it is also important to understand that there are different states which do not charge sales tax. States like Alaska, Montana, Oregon, New Hampshire and Delaware do not charge any sales tax; however, there are times when they levy selective taxes and local taxes on certain services like lodging. In Alaska, there are certain jurisdictions which can levy their own special taxes on goods and services.
What are the objects which fall under the purview of sales tax?
One of the most vital issues that need to be looked into is whether you have any products in your inventory which demands or requires taxation or not. This is more complicated than it seems. The reason for this is that while certain products can be taxed in one state, they might be left untaxed in other states. In general, all types of tangible personal properties need taxation which will include several things that can be touched and felt. There are certain items like groceries that are exempted from the sales tax. Items which are purchased for the purpose of resale are also exempted because the final customers are taxed for these purposes. The same principles work on various types of services as well which can be taxed depending upon state and jurisdiction.
How is the calculation for the sales tax done?
There are certain specific things which have to be considered when you are calculating the sales tax. In the first instance, you will have to consider the sourcing and the location where the sales gets taxed. Several states have destination source rules. This will mean that the sales will be taxed depending on where a buyer makes his or her purchase that is the destination of the transaction is crucial in this respect. Most states follow this rule that the taxation is done based on the destination of the sale. Some states also levy taxes based on where the product is originated from.
Different states handle their sales tax processes in a different manner. In most of the cases, there are base rates that are charged by different states, cities and other jurisdictions may also charge extra taxes above that rate. You can find different states sales tax calculator on the internet.
Thus all thought it may seem to traders and businessmen, that sales tax calculation is a simple and easy procedure but the reality is far more complicated. The sales tax of a product will vary in different states and additional taxation can be levied by other jurisdictions. In the city of Washington for instance, the tax rates are levied over and above a base rate of a nominal 6.5 percent. While a state like Seattle will levy a sales tax of 0.1 percent on top of the base rate. Hence, if you wish to calculate your sales tax then contacts professionals.