How to Charge Sales Tax With Internet Sales

As a merchant you collect the sales tax on your products.

Most states have a sales tax although there are a few that are still tax free (as of July 2010). When operating a business you are charged with collecting the sales tax and giving it to the local and state government. When running a business on the Internet the laws can be more complicated because you are in one state and your clients or those purchasing your products are in another state. Laws often lag behind technology so you must operate carefully to follow the law.

Things You'll Need

• Payment gateway

Instructions

1. Know the law. Contact your city and state authorities to ask about the tax laws for your state. A good place to start is your state's website. In general if you don’t have an office, building, store or some type of physical presence in a state, you don’t have to collect sales tax from buyers in that state.

2. Apply for licenses. You will be required to have some kind of business license, but if you are in a state that has sales tax you will also need to apply for a sales tax license, sometimes called a sales and use license. You will have an account set up for your sales tax license and have to report and pay the taxes on a regular basis, often quarterly.

3. Add the percentage of the sales tax into your products' costs and then take the amount out of your profit and pay the taxes. This is not the best way to to do it but could be the way to go if you have a very small business. To save money you may want to charge purchasers separately after they confirm what state they are in. A good choice is to use a payment gateway to take your funds for purchases and add in a sales tax option.