Real Small Business: Money Matters

Primer: Sales Tax

From the Editors of Real Small Business

A state sales tax ID number is basically a business version of your Social Security number under which you collect and pay tax for any service or product you sell that qualifies for taxation in your state. The state department of taxation provides sales tax ID numbers and it takes about a month to get one. The rule of thumb for sales tax is that most services are exempt and most products are taxable except for food and drugs. However, states have been gradually adding to the list of services that are taxable for the last few years. Check with your state department of taxation to determine if the product or service you sell is taxable in your state.

Exceptions to sales taxes usually include:

• Sales to resellers such as wholesalers and retailers that have a valid state resale certificate.
  
  
• Sales to tax-exempt institutions such as schools or charities.