Pssst.. In Case You Haven't Heard, Check Your Local Sales Tax Rates

If you do business in California and are one of those who throw in their sales tax and do not list it separately on an invoice: Congratulations! You just lost one percent of your profits to the State of California!

Many are unaware that our local California State Sales Tax has gone up as of April 1, 2009.

The fact that most people now know who AIG is, but do not know that their tax has gone up is proof positive that their has been a shift-change in what the California populace thinks is most important to them.

What an economy!

Check out your new sales tax rate. California Sales Tax Database. Be glad you don't live in Pico Rivera or Southgate where they pay double digit sales tax rates. (Note to self: do not buy anything in those cities)

I thought I would also take this opportunity to write up something on how sales tax can affect your business.

I am no tax lawyer, but as someone who is in sales (I sell environmental remediation equipment and services) and someone who does quotes and responds to RFPs on a regular basis to dozens of folks every month, I believe it is very important to your business to make sure you charge the proper sales tax. If you forget to charge sales tax or charge the wrong sales tax rate, it is highly unlikely you will be able to go back to your customer and get them to pay it 3 months later. However, the government will want to take their due regardless. If the government force the issue and you do not have recourse, paying that back sales tax will ultimately come back and bite your business' bottom line. Who wants that headache? Get this done the right way, the first time.

Similarly, it is important that you as a buyer insure you know whether sales tax is included in the purchase price of your equipment. I can think of dozens of times where a I have sold a piece of equipment to a customer only to have them come back and say, "You didn't tell me there was going to be $3000 worth of sales tax! I did not budget for that! What can you do for me?"

That is as tough a question to answer. Usually I refer them to the quote where right under the price it says the price "does not include taxes, permits, or governmental / documentation fees". I then tell them that the proper thing to do is pay the sales tax and then pass along the charge to their customer. Of course if they are reselling the item, they can provide a resale certificate to be kept on file in case of an audit.

Last point on this: Sales tax/Use tax is usually based on where the product is being delivered, not where your office is or where my office is. The sales tax rate is higher in locations where voters have approved additional "district" taxes. Most of these districts encompass an entire county-wide area; however, some districts are limited to a single city. Since the sales and use tax rate varies statewide, you need to know where the product is being delivered and charge sales tax accordingly.

Keeping these thoughts in mind could save yourself a lot of heartache later on... Maybe pass the link above to the person that does your accounting. They might thank you for it later.