How to charge for sales tax, and what to do with it?

Before you can know how to charge for sales tax and what you are going to need to do with it once you have charged the sales tax it is important that you understand a few things about sales tax. The first thing that you need to understand about sales tax is what sales tax; basically it is a tax on consumption. Sales tax is usually charged as a percentage on the total amount of the goods purchased. Something else that you need to know is that not all states have sales tax, currently the only states that do not have a sales tax are, Alaska, Delaware, Montana, New Hampshire and Oregon.

Something that you might not be aware of is that even though all states have an assessed sales tax there are some cities and counties that have their own taxes in addition to the state sales tax. What this means is that in addition to the state sales tax you are going to need to add the city or county sales tax on top of the state sales tax. But perhaps the most important thing that you need to keep in mind when it comes to sales tax is that the laws and actual amounts of sales tax are always changing so you need to continuously stay on top of the changes to appropriately charge sales tax on your products in your state, county, and city.

Difficulty rating: Easy to moderate

Step one:
The first thing that you are going to need to do is to figure out if sales tax is charged in your state and if it is what rate the state charges for sales tax. Keep in mind that some cities and counties also have added sales taxes in some states so be sure to look into that as well.

Step two:
The next thing that you are going to need to do is to determine the final amount of sales tax that you are going to be charging your customer.

Step three:
Now that you know the final amount of sales tax that you are going to be charging your customer you are going to need to apply that percentage to the gross amount of the purchase that your customer is buying. Keep in mind that this cannot be done until the very end of the transaction.

Step four:
Something else that you need to think about when charging sales tax is that some states only charge sales taxes on certain items and others like food are considered exempt or some states charge a lower amount of sales tax on food and other items while they charge a higher rate on non needed items. If this is the case you are going to have to run up two different totals and apply the appropriate amount of tax to each section.

Step five:
Now that you know how to charge sales tax you are going to need to know what to do with it after you have charged it to your customers.

Step six:
The first thing that you are going to need to do is to account for the sales tax that you have charged each customer. Most companies have an account titled sales tax in their accounting procedures, which is where the sales tax revenue is accounted for.

Step seven:
Now that you have accounted for the sales tax you are going to have to follow the individual guidelines for your state on how to remit your sales tax. But regardless of how you submit your sales tax you are going to have to pay it to your state taxing authority. Most companies pay their sales tax on a quarterly basis, but you should talk to your tax advisor or accountant to find out what is required for your state.

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