Corporate tax UAE obligations can be comprehensive and include all federal, state, and local jurisdictions. While income taxes and annual returns tend to take center stage. It’s equally important to prioritize sales tax compliance and keeping up to date.
COINCIDING WITH THE NEW CALENDAR YEAR.
Unlike federal taxes, sales and use taxes are collected and remitted. To provide direct funding for state, local, and regional services. Each jurisdiction has its tax requirements, and factors. Such as tax rates, tax exemption periods, critical thresholds, and volume can all affect your sales tax liability. Know what to consider in your reporting process to report and pay the right amount at the right time.
HOW IS SALES TAX DETERMINED?
Sales tax is an amount charged to customers based on the products and services they purchase. The value is usually a percentage of the purchase price. And is often the sum of separate taxes charged by state, county, and city agencies. Sales tax charges may also be assessed by regional transportation authorities, tribal governments, and others authorized. To collect money based on in their jurisdiction.
Each state or organization determines which goods and services are taxable. What rates will apply, and any exceptions to the categories. For example, one state may tax all food sales. While no food sales are taxed in another, and only prepared foods are taxable at one-third. Knowing the nuances of the rules can be daunting. Which is why many businesses rely on tax software. To keep fees charged on file or in their payment system.
SALES TAX COMPLIANCE IS MANDATORY
In exchange for business privileges, state, and local governments require businesses to meet their obligations. To collect and pay taxes on their behalf when they have sold taxable items or services. The annual business license registers the business with state and local governments. Which imposes the burden of collecting and paying tax.
RECORD, RECONCILE, AND REPORT SALES TAX AMOUNTS
Filing sales tax returns and filing their payments are separate tasks businesses must complete. While their due dates may be the same. Recording them on separate lines in the internal checklist. This will help ensure that all steps are noticed in the months needed.
To report tax activity, businesses must record sales by tax category. And multiply that amount by the tax rate set by the authority for that category. The total amount for each category is then added together. And reported as the total amount payable by the business to the tax authorities.
Before reporting and transferring funds. The total amount must be reconciled with the amount received from the customer. To ensure that the amount received corresponds to the declared obligation. Any significant discrepancies should be investigated and resolved.
KNOW APPLICATION AND REMITTANCE REQUIREMENTS AND DUE DATES
State requirements for filing a sales tax return vary, but many states cover some of the same items. Know the dates and times you must file and pay sales tax based on state and local government rules.
THINGS YOU NEED TO KNOW INCLUDE:
- Due Date – Generally, tax returns must be filed by a specific date of the month after the tax return is filed. For example, for sales tax collected in February, you may have to file your tax return on the 30th of the month, March 30. The date may change, whether the 15th, 20th, or 30th, but it will be consistent throughout the year.
- Weekends and Holidays – Note how the states you report adjust their due dates when they fall on a weekend or holiday. Most will move the due date to the next business day, so take a moment to confirm their practice each year.
- Incremental filing frequency – Some states require all sales tax returns to be filed monthly, quarterly, or annually. Many states use a tiered process as revenue increases, as does filing frequency.
- Electronic Tax Return Required – Most states require an electronic sales tax return after businesses have made a specific amount of sales. It can be as low as $500, so you can catch it quickly. In addition, electronic filing facilitates workflow, increases accuracy, and allows for faster processing. Once the minimum threshold is reached, update your checklist with the new due date to maintain sales tax compliance in the future.
- Zero sales tax declaration – In a start-up or a business driven by large fluctuations in revenue, be sure to understand whether a tax return is required if there is no taxable income in a given month.
COMMON SALES TAX COMPLICATIONS
With over 11,000 sales tax jurisdictions in the United States, there are bound to be some compliance troubles that arise for businesses responsible for collecting, filing, and remitting sales tax on their behalf.
- Sales Tax Rates – Newer, smaller businesses may find it cumbersome and complicated to manage tax rates and ensure they are assessed in a timely, accurately calculated, and remitted manner. Additional expertise or support may be required to maintain sales tax compliance.
- Multiple locations – When a business operates from multiple locations, obligations also multiply. Instead of adding sales figures and related taxes to the same tax return, some states require each location to receive a unique code and report its business independently.
- Relationship with Sales Tax – Corporate headquarters, retail operations, warehouses, and employee residences may create obligations to collect, report and pay sales tax even in states where the business has no physical presence. Sales tax constraints can greatly extend the scope of sales tax liability to even the smallest businesses.
- Sales Tax Holidays – Many states offer a few days of the year when customers can purchase certain products without paying sales tax. These sales tax exemption periods encourage sales, but they can make administration and tax calculations more complicated for businesses due to differences from the normal process.
- Cannabis and other unique industries – Sales taxes and other rules related to the cannabis industry can also be challenging for business owners growing and selling cannabis products. Excise, retail, and sales taxes imposed by various agencies and variable tax rates on products can take business owners longer to navigate and manage.
SIMPLIFY SALES TAX COMPLIANCE
Navigating sales tax obligations while growing your business or expanding into new tax jurisdictions can add a burden to your day-to-day business operations. Software solutions can help the business in the future, but implementing them and fixing existing problems can be difficult despite their high-priority status.