Chamber Chat: sales tax 101
Rifle Area Chamber of Commerce
Yes we are talking about that bad word that nobody likes to say, or pay: taxes.
Collecting sales tax is one of the most confusing aspects and might possibly be one of the most frustrating things you do as a business owner, next to dealing with a difficult customer.
Often questions abound. When does sales tax apply? Who can be exempt from sales tax? What is a sales tax permit and do I need one?
All questions aside, you as a business owner are required to know your tax obligations. That’s where your chamber can help be the resource with the tools you’ll need to answer these questions.
As a business owner, you are required to assess sales tax, collect it and pass it on to the appropriate authorities, such as the state or local governments.
Sales tax rates and laws vary from state to state, which may often be why there is so much confusion when it comes to knowing everything there is to know about “sales tax 101.”
One thing that is for certain is the amount of tax that is owed is determined by multiplying the applicable local tax rate to the total sale price of the products and goods sold. For our community it is:
City of Rifle – 4.25 percent
Garfield County – 1 percent
Colorado – 2.9 percent
The city sales tax is paid directly to the city of Rifle, while Garfield County and the state of Colorado tax is paid to the state. A sales tax license is needed by the vendor when “tangible personal property” is sold (services are not taxable) and such licenses can be obtained by from the state of Colorado and the local municipality.
In Rifle we are fortunate that we have a sales tax expert in the area who would be happy to help walk us through the process and answer any questions we may have.
That expert is Nancy Sanchez, Rifle sales tax clerk. You can find her at City Hall, 202 Railroad Ave., or call 970-665-6443.
When money is collected from sale tax it is used for funding valuable services within our community, such as the local police department and maintaining our community parks. These are services that make our communities great.
As a business owner who administers and collects sales tax, your best opportunity for success is to have proven practices in place that can help you with complex tax compliances and avoid errors.
Keep in mind these top five “good business practices” shared with us from other business owners:
Keep good records. Keep track of all transaction history, exemption certificates and other relevant information. If your practices, calculations and records are in good shape, you should be too. Invest in a software accounting system to streamline your process. This is a great way to keep accountability. Consider it as an investment in your business — you’ll be surprised how affordable they are. You should retain all relevant tax records for at least seven years.
Refer to or hire a local certified public accountant for accountability and familiarization of tax rules, and, even better, favorable tax credits and deductions.
Keep a bank account separate from your business bank account to track sales tax transactions. Considering that it is not your funds to use in the first place. Keeping sales tax funds in a separate business bank account will keep you from being tempted to use it for other purposes.
Efficiently manage exempt sales. Not all customers are required to pay sales tax. Depending on the rules in a taxing jurisdiction, certain businesses and individuals may be exempt. If you’re the seller, it is dependent on you to collect valid exemption certificates, keep them on file and track their expiration and renewal dates.
Most importantly, know your deadlines. When it comes to remitting sales tax, you as a business owner should know when taxes are due. Avoid late fees, unnecessary charges or fines for missing deadlines. This tip could potentially save you and your business hundreds of dollars annually.
Keep in mind, you often can refer to your local chamber of commerce for assistance on this subject.
Andrea Maddalone is the president and CEO of the Rifle Area Chamber of Commerce. To contact the chamber, call 970-625-2085 or visit http://www.riflechamber.com.
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