Make Sales Tax Easy

Here is how you can make sales tax easy, though there are more than 7,500 sales tax jurisdictions and 15,000 rates. You can make sales tax easy even though tax locations often ignore cities or zip codes and you may soon have to pay tax on out of state sales.

You cannot make sales tax easy by charging average tax rates, because you must pay the larger of tax collected or due for each jurisdiction. For example, say you charge everyone 7% with these sales:

  Rate     Sales         Tax
    6%    10,000        600
    7%    10,000        700
    8%    10,000        800
    Tax due             2,100

You will owe $2,200, not $2,100, plus interest and penalties, because you must pay the extra $100 collected in the 6% jurisdiction and get no credit for the $100 not charged in the 8% location.

To avoid this, you must charge according to exact customer location. Fortunately, you can make that fast and easy. You can use a web store that charges the right sales tax on every invoice. Ideally, your web company will file collect all the tax and file all the tax returns for you.

You also can make sales tax easy by getting help from Avalara. Here is a free AvaRates link. It will let you get the city, county and state tax rate for any customer, based on their exact location. This link includes my account, so you do not have to register until we all use this link more than 50 times a month.

If you have too many customers for the above free link, Avalara has rather inexpensive programs that link to QuickBooks, Xero and many web stores. 

Please contact Mike Block CPA for any Avalara, sales tax, QuickBooks or Xero questions, especially if you have a sales tax or other tax exam.

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