This post is going to be all about sales tax, what it is, where it is applicable, do you need to worry about it, etc. Sales tax is a common point of confusion for people starting US businesses for the first time and we’re here to help!
What is Sales Tax?
Sales tax is defined as “a tax paid to a governing body for the sales of certain goods and services.” These goods include most things except necessities such as food, and even clothes in some states. Sales tax is only assessed on the final sale to the end customer, and is usually around 7% - 8% of the value of the good.
Sales Tax vs VAT
Sales tax is different from VAT. VAT is decided by one governing authority, where sales tax is different in each of the 50 states in the US, as it is a state government regulation. This means rules, regulations, and enforcement vary widely depending on the state you are incorporated in, have a sale in, or maybe even have an office or warehouse in.
"De Minimis" Exception
Most states have what is called a “de minimis” exception. This exception is typically a dollar amount or number of sales within a year that needs to be reached before sales tax needs to be paid to the state government. A lot of times, this is $100,000 of sales within a year, or 200 sales within a year, and that is within each state meaning you could reach that threshold in one state, but not another.
Service Companies
The last thing to note for sales tax basics, is services are not subject to sales tax, only product. If you sell a good alongside your service, THEN you may be subject to sales tax. But, if all you are doing is consulting, coaching, or any other service where there is no good involved, then you will not be subject to sales tax.
At this time, Bookmate does not offer sales tax services. There are softwares and platforms that automate this for you, and we would invite you to look into those if you would like to discover more about sales tax.
Next steps?
Book A Call! Not a Bookmate customer? Book a call with us, we can help determine what you need to have a successful tax season!
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