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How to Register and Collect Sales Taxes

The vast majority of states collect sales taxes on retail sales of products or services. The amount of the sales taxes varies from state to state, as does the range of products or services that are or are not taxed, and the manner in which the taxes are collected.

Although it is generally referred to simply as "the" sales tax of a state, the single tax rate that consumers and sellers refer to is usually a combined rate made up of a state tax and a local tax that is imposed at the county or city level. Tax rates also vary by business sector, in that one rate may apply to restaurants, another to retailers and yet another to hotels, etc.

If you are starting a business that sells products or services upon which your state, city or county levies a sales tax, you will need to register to collect that tax upon sales. This process involves applying for a sales permit for each office, store or outlet at which you will be collecting sales taxes.

The name of the department and the exact name of the sales permit that is issued in your state will vary. To locate the department or agency that will issue your permit, visit the home page for your state and search for "sales tax," or begin by contacting your county or city clerk, since in some states you may have to make separate payments to the city/county as well as to the state.

Your county/city or state agency will provide you with information on the amount you must collect on each sale, as well as charts for cashiers and recommendations for larger businesses that may want to purchase/lease cash registers with automatic tax calculating programs. For the trouble of collecting the sales taxes, about half of the states pay a compensation fee to businesses of between 0.5 to 5% of the total tax collected, with a ceiling above which no additional fee is paid.

Depending on your state requirements, sales taxes will usually be paid to the appropriate city/county and state agencies on a monthly basis. Although, lower or higher sales volumes may result in less or more frequent payment requirements.


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Tip: Did you know that Delaware and Nevada are top two incorporation states?

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