Wednesday, January 12, 2011
How do you figure sales tax?
Since I sell both locally (craft fairs, vendors) and on Etsy (some taxed and some untaxed sales) I have had to decide on how I want to deal with the question of collecting sales taxes.
When pricing I have decided that I will just 'eat' the sales tax on local purchases so that I don't have to mess with collecting sales taxes right then. I figure that at local craft fairs I am not paying Etsy or PayPal on these sales. Plus, on Etsy I want to encourage customers to come back and not give them sticker shock by collecting sales tax after they have decided to make a purchase.
So... I have set up my Sales Spreadsheet to collect the info I need to complete my State Sales Tax Form, this is seperate from my detailed sales report or item inventory sheets. Total Sales and Taxable Sales. Since I don't collect sales tax 'on-top' of the cost of the item's price, I have to back-up to the pre-tax price to find out how much was for sales tax. Here is a website that has a set of boxes where you can plug in your numbers, and it will figure it out for you: Sales Tax Calculator (I haven't tried this out through).
You can take your price and divide by 1.(sales tax) to find out what your pre-tax price would be. For a $10 item it would look like this:
$10 / 1.0825 = 9.24 (this is the item's 'real' price)
To double check: $9.24 x 8.25% = 0.76
This worked quickly when I went through my list of sales. All sales that happened in my state I just figured out the pre-tax price this way. Then I added all sales, and all taxable sales together to complete the tax form. I even got my sales tax file ahead of the deadline!