Sales Tax For Beginners!
This week’s blog is a brass-tacks, down to facts intro to Sales & Use Tax for business owners!
So, you decided to go into business for yourself and provide a service or product to customers? Congratulations, you’re now a collector and remitter of Sales Tax on taxable goods in your State!
How do I know if I need to collect, report, and remit Sales Tax?
Head over to your State’s “Dept. of Revenue” website. They will have some kind of document available!
Florida’s is called the “Business Owner’s Guide for Sales and Use Tax” (found in the F.A.Q’s).
The exact verbiage for Florida’s determination of “who pays Sales & Use Tax” is as follows:
“If you will engage in a business activity that is subject to sales and use tax, you must register as a sales and use tax dealer to collect, report, and remit Florida sales and use tax before you begin conducting business in Florida.
Taxable business activity includes, but is not limited to:
selling, leasing, licensing, or renting tangible personal property
(electronics, furniture, motor vehicles, certain food and meals, and other goods)
leasing, licensing, or renting real property
leasing, licensing, or renting living, sleeping or housekeeping accommodations
selling detective or burglar protection service, nonresidential cleaning service, or nonresidential pest control service
selling admissions to any place of amusement, sport, or recreation
operating amusement machines.”
“Several examples of exceptions to this tax are certain groceries, any prosthetic or orthopedic instruments, common household remedies, seeds and fertilizers, and cosmetics.” (Raw materials?)
“Are SERVICES subject to sales tax in Florida?”
The state of Florida does not usually collect sales tax from the majority of services performed.
“An example of taxed services would be investigative and crime protection services, interior nonresidential cleaning services, nonresidential pest control services, or one which includes repairing or creating a product.”
“Is SHIPPING & HANDLING subject to sales tax in Florida?”
“When shipping the vast majority of items, you need to charge sales tax in regards to the shipping charge.
Sales tax on shipping does not need to be charged if the charges are both optional, and stated separately. (Ex. if you promo for FREE shipping, no tax on the ship charge).
In addition, no shipping charge can be taxed if it is both separately stated and the title of the property has already passed to the purchaser.”
“Is DROPSHIPPING subject to sales tax in Florida?”
This is for our Amazon FBA or other Marketplace sellers. Vendors (often in other states) who facilitate sales through a third-party supplier, who ships to the buyer, that they hire or “elect into.”
The State of Florida’s longtime verbiage went as such:
1. “In the state of Florida, dealers registered within the state are legally required to collect tax.
2. “Any registered, nonresident dealer's sales of property to any unregistered, nonresident consumer that are drop shipped into Florida are NOT considered to be beholden to Florida's sales and use tax unless the following requirements are met: [three qualifications are below]
The seller (located in FL) ships from their own facility to the buyer (also located in FL).
The seller (located outside FL) ships from their own facility and uses a method of transport leased or owned by that seller/taxpayer (into Florida).
The seller ships property to the customer from the seller/taxpayer's place of business (located outside FL), and the terms of the delivery will require the taxpayer to collect the sales price from the customer at the time of delivery of the property.
Recent laws have passed regarding
e-commerce and the State of Florida, 2021:
As reported by Forbes.com:
“Beginning July 1, 2021, most retailers selling more than $100,000 a year online will have to start collecting Florida’s 6% sales tax at the point of sale.
[It will] require out-of-state online retailers to collect [and remit] sales taxes on purchases made by Floridians.
In June 2018, the U.S. Supreme Court ruled that state and local governments had the right to collect sales taxes from purchases made online, no matter where the seller was located.
Prior to that case: sellers only had to remit sales tax if the online purchase was made by someone in the same state. (But not anymore! Times have changed.)
So, unless you are selling a specifically-exempt or protected item or one of a few taxed services -- you must be registered with FL Dept of Revenue to collect, report, & remit Sales Tax regularly.
We'll be using the State of Florida for the below walkthrough, as many of our Sales Tax clients are based there. Again, if you’re a seller outside of Florida, you must visit your State’s Department of Revenue website and publications for specifics on Sales Tax compliance there!
The State of Florida currently has a 6% Sales Tax rate on Sales.
The Department of Revenue usually assigns a Filing Frequency once you register as a collector. They will issue a letter when your filed returns indicate to them you’re collecting more Sales Tax.
The below chart outlines how much Sales Tax collected would have the Department bump a seller up to the next filing/remitting frequency:
Annual Sales Tax Collections | Return & Filing Requirement |
More than $1,000 | Monthly |
$501 - $1,000 | Quarterly |
$101 - $500 | Semiannual |
$100 or less | Annual |
Many States have an online platform for filing the Sales & Use Tax Return (Called “dr15” in Florida: https://ritx-fl-sales.bswa.net/) which allows the taxpayer to quickly and conveniently file and pay (remit) collected Sales Tax, online.
Discretionary Sales Surtax
“In addition to the state sales and use tax rate, individual Florida counties may impose a sales surtax called discretionary sales surtax or local option county sales tax.
Sales tax dealers must collect both discretionary sales surtax and the state sales tax from the purchaser at the time of sale, and remit the taxes to the Florida Department of Revenue.”
You essentially need to look up the County you’re in to determine if you add the Discretionary Sales Surtax (Line 15d on your Form dr15). Your county will have a set rate from .5% to 2.5%