Beware of state taxes that may apply to your business

Sales Tax

The taxes charged by state and local authorities can have a huge impact on your prices. Image: Flickr / digitalcolony / CC-BY

Running a legal business means paying taxes. Depending on which state you are in, there are some odd taxes that you may need to ensure that you are paying in order to stay compliant.

Taxes can be levied on just about anything

State and local municipalities have the right to levy a tax on just about any kind of commerce they want. These taxes not only help raise revenue but are used as a way to encourage or discourage a particular kind of business. Tattoos are taxed in Arkansas. Maine taxes the growing, handling, processing, selling and purchase of blueberries. In New York, a tax is levied on bagels that are sliced but not on whole bagels.

[Some states levy a tax on installment loans; some online lenders do not have to pay these taxes.]

How these taxes affect businesses

For small business owners, tracking, collecting and paying many of these taxes can be difficult. For sole proprietorships, when the owner doing the accounting, sales and everything else, it can be especially difficult. For larger businesses, these taxes must still be tracked, and they have a bigger effect on prices. Higher taxes on a particular type of product means that a business must either price its product differently or charge customers more. No matter what the tax is, increasing the cost of doing business means increasing the cost for business owners and customers.

Determining what taxes you need to pay

If you are a small business owner, staying in compliance with all state, local and federal laws is incredibly important. If you do not pay taxes that apply to your businesses, you could face fines, fees and the expense of re-doing months or years worth of state taxes. Making sure you are paying the right taxes starts with registering your business correctly with the state department of revenue or whichever state authority is responsible for collecting taxes. Ask if that authority holds classes or individual consultations. Remember, these state agencies want to help you get your taxes right, you just need to ask for help.

Sources

Green Bay Press Gazette
SBA.gov
ABC News

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