We’ve covered a lot about sales tax lately – from when to pay, what to avoid, and even how to collect in a festival setting. But what about the logistics of registering, and who exactly has to pay the sales tax?
This article should hold the answers, with three crucial sales tax considerations…
Your Social Security May Be Required
For a lot of people, when it comes to filling out forms – official or otherwise – many leave the box for their Social Security Number empty. And, understandably so! It can be scary entrusting your identity to anyone, not to mention a government system that is sure to pass through a lot of hands.
However, when it comes to sales tax, often that request for your SSN isn’t just a formality.
Many state and local tax (SALT) jurisdictions require proof of identity in the form of a driver’s license or SSN before being able to issue a sales tax license, and if you’re not registered to collect sales tax, not only is it illegal to charge taxes without a permit, but not fulfilling your sales tax requirements at all can lead to heavy penalties.
Our advice? Before choosing to provide your SSN or leave it blank, simply ask if it’s necessary first.
Understand Who’s the Trustee
Whenever a business or individual collects sales tax, they’re essentially agreeing to act as a trustee until the money can be appropriately distributed to SALT authorities. The tax collected does not belong to the company or individual, nor is it simply the “company’s problem” to handle the appropriation of funds.
While the question of who’s the liable trustee differs by the state, usually whomever’s personal information and SSN is on file for sales tax licensing, is seen as the one responsible for ensuring SALT receives that tax.
With this in mind, it’s perfectly legal for SALT jurisdictions to demand your SSN if they need it.
Florida, for example, requires the owner’s SSN for sales tax registration – unless they’re a part of a corporation, business trust, non-business trust, Native American tribe, or estate – whereas Texas often requires the SSN of every corporate officer and director.
Before simply assuming, take the time to search up your state sales tax requirements and liability rules, to protect both yourself and your company.
Practice Good Habits
Perhaps the best way to keep your business on the up-and-up, is to simply practice good habits within your company systems.
Little things like paying your sales tax dues on-time, asking questions, reviewing contracts, state laws, and shareholder agreements to determine liability, properly training employees on their sales tax obligations, and consulting with your tax professional often to stay up-to-date on new requirements, can help protect a business from a mountain of fees and stress down the road.
Don’t wait, and don’t just assume! Educate yourself and your employees on proper sales tax use, while if you don’t have a sales tax professional on hand, we’d be happy to recommend you one.
(This article contains information gathered from this post, by Judy Vorndran.)