- [Instructor] The burden of sales taxes varies greatly
from firm to firm and state to state.
For some companies that operate in only one state
and sell a physical product as an ancillary business
to a non-taxed service sale,
the sales taxes might not be a big issue.
But for other firms, the process of reconciling your sales
and then paying sales taxes on it can be truly a nightmare.
Let's take a look
at how a sales tax filing works in practice.
So we are here with the State of Connecticut's
Department of Revenue Services.
And we're just using them as an example,
but most other state tax portals will work similar to this.
All right, now we're going to need to pick the period
that we're filing sales taxes for.
In general, most firms will have
to pay sales taxes on a monthly basis.
However, if you're a firm
that doesn't sell a lot of products subject to sales tax,
perhaps, as an example, you only occasionally sell hats
to people that come in to get their hair cut
or something similar, well, then you'll probably only end up
paying sales taxes on a quarterly basis.
Either way, though, you're going to start out filing monthly,
and then the State will determine the frequency
with which you need to pay your sales taxes.
So we'll say that we're paying
for the December 31st, 2018 period, and move ahead.
Now you're going to need to go through
and determine the level of sales that you have
under each of your sales tax rates.
Many states have multiple tax rates
depending on the product or service being sold.
In the State of Connecticut, for example,
the basic rate for most products is 6.35%.
But for a select number of products,
the sales tax is either 7.75 or 9.35%.
All right, so now we're going to pay our sales taxes
at the 6.35% rate.
And let's just assume, for the sake of a nice round number,
that we sold $20,000 in goods and services.
All right, and it's only those products
in goods that are taxable.
Our labor and services are not taxed.
Again, this'll vary based on the business in question.
But for our purposes, we'll simply keep it simple.
So that means we're going to owe $1,270 in sales taxes.
Now if we've collected from consumers
anything more than $1,270,
we have to let the State know about that.
All of that $1,270 should've been collected from consumers
when they bought product from us.
If you didn't collect it, well, that's too bad.
You're still going to have to pay the State what you owe them.
If we've collected any more than that,
let's just pretend we collected an extra dollar
somewhere along the way, well,
the State is then going to want
that extra $1 paid out to them.
That'll take our tax bill from $1,270
to $1,271.
Once we've gotten to this stage, we can advance.
We're going to go through and review all of the information,
add any credits from past periods,
validate our complete sales tax return,
and then move ahead.
Now at this point, you'll have to decide
how you're going to pay.
For the sake of payment, in this particular case,
I'll simply say that I want to pay separately
from this particular filing.
But you can certainly choose to pay using direct payment,
that is, using your bank account,
which the State will have a record of on hand.
They require you to divulge those details
when you sign up to make sales tax payments.
Or you can pay, in this case, with a credit card.
Now at this point, you'll be all set to move ahead
and confirm that you're going to pay $1,271 to the State
based on your sales tax.
Now I'm not going to go ahead and submit this
because this is just a sample.
But if you wanted to finalize, you'd click Yes,
then you'd confirm and move ahead.
And that's how you file your sales taxes.
At this point, you should be ready to go through
and do this for your own business.
Remember, for most businesses, this is a monthly obligation.