Do You Owe Use Tax?

Let’s assume you’ve mastered the sales tax obligations facing your small business. Are you also up to speed on your company’s obligation to pay use taxes in your home state? In addition to the sales tax you collect from your clients and customers, you are also responsible for making sure you’ve paid appropriate taxes through the companies you purchase from.

Sound complicated? Let’s break it down: Say your company found a great deal on office furniture sold by an out-of-state company. If you’d purchased your desks and chairs from the company next door, they would collect sales tax on your purchase. The out-of-state company or online supplier typically won’t collect sales tax. Therefore, your business is responsible for paying the equivalent use tax instead.

These are the basic scenarios in which you’ll need to self-assess your company’s use-tax obligations:

·        When purchasing goods from an out-of-state company that hasn’t charged sales tax

·        When purchasing goods from an online supplier that hasn’t charged sales tax

·        When using your own company inventory as business supplies

Like sales tax, use tax is tricky to track manually—and like sales tax, a simple accounting error can trigger an audit. According to automated tax management provider Avalara, businesses that operate in multiple states and tax jurisdictions are at particular risk for mistakes in calculating their use tax obligations.

No industry is immune: manufacturers, retailers, construction companies and service providers would be smart to research solutions that can automate use tax payments as well as sales tax obligations.

When it comes to sales and use taxes, be safe, not sorry. Be prepared to self-assess and, if possible, invest in automated tax compliance solutions to stay ahead of auditors.

Source: http://www.manta.com/resources/tip-of-the-day/do-you-owe-use-tax/?utm_medium=Email_Marketing&utm_source=Newsletter&utm_campaign=TOTD&utm_content=TOTD_NewDesign2015&utm_term=19024&su=hq344mgu9vl41l