My Queue

There are no Videos in your queue.

Click on the Add to next to any video to save to your queue.

There are no Articles in your queue.

Click on the Add to next to any article to save to your queue.

There are no Podcasts in your queue.

Click on the Add to next to any podcast episode to save to your queue.

You're not following any authors.

Click the Follow button on any author page to keep up with the latest content from your favorite authors.

Back to Encyclopedia

Sales Tax

Definition: A tax collected by all retailers and certain service providers when they make taxable retail sales. Sales taxes could include state, county and local taxes.

Sales taxes are levied by many cities, counties and states at varying rates. Most provide specific exemptions, as for certain classes of merchandise or particular groups of customers. Service businesses are often exempt altogether. Contact your state and/or local revenue offices for information on the law for your area so that you can adapt your bookkeeping to the requirements.

Before you open your doors, be sure to register to collect sales tax by applying for a sales permit for each separate place of business you have in the state. A license or permit is important because in some states it is a criminal offense to undertake sales without one. In addition, if you fail to collect sales tax, you can be held liable for the uncollected amount.

If you're an out-of-state retailer, such as a mail order seller who ships and sells goods in another state, be careful. In the past, many retailers haven't collected sales taxes on the sales of these goods. Be sure you or your accountant knows the state sales tax requirements where you do business. Just because you don't have a physical location in a state doesn't always mean you don't have to collect the sales tax.

Many states require business owners to make an advance deposit against future taxes. Some states will accept a surety bond from your insurance company in lieu of the deposit.

It's possible for retailers to defer paying sales taxes on merchandise they purchase from suppliers. Once the merchandise is sold, however, the taxes are due. The retailer adds the sales taxes (where applicable) to the purchase. To defer sales taxes, you need a reseller permit or certificate. For more details on obtaining a permit, contact your state tax department.

Browse By