If you are an entrepreneur who is required to collect and remit sales tax in various states, it can be difficult to keep track of what tax rate to charge as well as what your reporting obligations are. Sales tax can already be a tricky subject for business owners, but if you are a company selling in home-rule states, it can be even more challenging to remain compliant.
If you are selling in one of the home rule states,.counties and cities are allowed to administer their own sales and use tax. They can audit businesses, create their own tax forms, and define terms differently from the state.
If you are selling in non-home rule states, sales tax is administered by the state and its tax authority (i.e. California Department of Tax and Fee Administration). Although there is a small number of home-rule states, if you are selling to one of these few states, it can be an aggravating process.
For example, a home-rule state may require that a business register not only with the state tax authority, but also with the local one. It is possible they may levy local sales tax on transactions that are exempt from the state’s sales tax. They also may demand that you file local sales tax returns as well as remit taxes. This would be in addition to your state return. This can be difficult for business owners as local returns may or may not follow the same schedule as the state.
Unfortunately, home-rule jurisdictions have been complicating taxes for decades. The primary home rule states are Alabama, Alaska, Colorado and Lousiaina. Thankfully, these states are doing their best to simplify sales tax, specifically for remote sellers.
For example, in Alabama remote sellers can apply, remit, and report use tax on all sales into the state rather than having to report the combined sales tax rate in effect at every location. Instead of having individual taxing authorities, Alabama taxes are audited by the Alabama Department of Revenue.
If you want to ease your tax burden, consider working with an accountant to assist you navigate these waters. Failing to meet the guidelines of each jurisdiction can result in costly penalties and interest if not filed and paid accurately and on time.