Sales Tax: Top 5 Errors Business Owners Commonly Commit

Are you a business owner in Utah struggling to navigate the complex world of sales tax? You're not alone. All business owners must correct their mistakes when collecting and remitting sales tax in Utah and Arizona. But don't worry – in this post, we'll highlight the top 5 mistakes Utah business owners make regarding sales tax and provide tips for avoiding them.

1) Misunderstanding Nexus 

Nexus refers to the connection between a business and a state that requires the business to collect and remit sales tax. Many business owners in Salt Lake City and Phoenix need help understanding what creates nexus, leading to potential noncompliance issues. To create a nexus in Utah or Arizona, business owners must establish a connection with the state, including maintaining a physical presence like a storefront or warehouse or having employees or independent contractors working in that state. Therefore, it's important to understand what creates a nexus and register with that state.

2) Failing to Collect Sales Tax On All Transactions  

Another common mistake business owners make is failing to collect sales tax on all transactions. Utah and Arizona imposes sales tax on various transactions, including the retail sales of tangible personal property, specific digital products, and certain services. However, some business owners mistakenly believe that certain transactions are exempt from sales tax, leading to potential under-collection issues. Therefore, it's important to understand what transactions are subject to sales tax and collect the appropriate amount on all transactions.

3) Not Keeping Adequate Records 

Proper record-keeping is essential for sales tax compliance in all states. However, many business owners must keep adequate records, which can lead to potential audit issues. Business owners should keep detailed records of all sales, purchases, taxes collected, and any exemption certificates received. As Utah and Arizona law requires, it's also important to maintain these records for at least three years.

4) Failing to Remit Sales Tax On Time 

Depending on the amount of tax owed, Utah and Arizona business owners must remit sales tax regularly, either monthly, quarterly, or annually. However, many business owners need to remit sales tax on time, leading to potential penalties and interest charges. Therefore, it's important to understand the remittance requirements and ensure that sales tax is remitted on time to avoid penalties.

5) Not Staying Up-to-Date on Changes to State Sales Tax Laws 

Utah and Arizona state sales tax laws can be complex and ever-changing, and many business owners need to stay up-to-date on these changes. This can lead to potential noncompliance issues, as well as missed opportunities for tax savings. It's important to stay informed about changes to Utah state sales tax laws and seek professional help if necessary.

In conclusion, sales tax compliance can be challenging for all business owners. Still, by avoiding these common mistakes and staying informed, you can ensure that your business stays compliant and avoids potential penalties or interest charges. If you need help navigating Utah state sales tax laws, consider seeking the advice of a qualified tax professional.

Tax issues don’t wait—neither should you. Contact Jordan F. Wilcox for a free consultation!