A sales tax return is a form used by businesses to report sales tax collected and paid to the sales tax authority. The total amount owed to the government agency is calculated and submitted with the return. The calculations used differ according to the rules of the taxation agency.
A sales tax is a flat percentage charged at the point of purchase. The rate charged is determined by the government responsible for that area. There are a wide range of government levels that can implement sales taxes, including city, state, or federal agencies.
When a sales tax is implemented, the government agency responsible for the administration of the state tax creates the rules about what types of items are taxable. Point of sale systems are programmed to automatically calculate the tax on the appropriate items. The total value of the sales tax collected is entered on the sales tax return form.
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The vast majority of agencies that collect sales tax have rules for businesses. There are two options: credit for sales tax paid on the purchase of items or a sales tax exemption. The sales tax credit allows businesses to deduct the sales tax that they pay on supplies.
On the sales tax return, there are three values: debit, credit and difference. The amount of the debit is the amount of sales tax the company paid for that period. The credit amount is the value of sales tax obtained from customers.
The difference between the amount collected and the amount paid is the value that is remitted to the government agency. A sales tax exemption is a certificate issued to businesses that allows them to avoid paying the sales tax at the point of sale. This certificate must be presented at every purchase.
A sales tax return is only required from registered businesses in certain industries. The exact rules vary by location, but typically apply to firms that sell directly to an end consumer. Distributors are typically exempt, as they do not product anything new.
In order to submit this type of document, the government agency will provide the business with a sales tax or business number and forms with the business number preprinted. On the sales tax return remittance form, the reporting period is provided. Calculate the total amount of sales tax collected during this period, using the information from the point of sale system.
Confirm the value of eligible sales tax paid during the period from the business accounting system. Enter this value on the sales tax return form. If the amount received is greater than the amount paid, issue a check for the different.