Staying sales tax compliant isn’t necessarily the first thing new business owners think about, but it’s an important part of running a successful business. Unfortunately, it isn’t much fun because there are a lot of different rules and regulations you have to follow. Here are five sales tax considerations all new business owners need to consider in order to remain compliant.

1. Be Prepared Before You Start Selling

To set yourself up for success, it’s best to determine what rules and regulations impact your business from day one – and follow them accordingly. Neglecting to do so can bite you later when you find yourself facing financial penalties or, worse yet, an audit. Spend some time researching nexus laws and make sure you understand what your sales tax responsibilities are. It’s also good practice to create a quick-reference document that outlines all applicable nexus laws.

2. Know State-by-State Compliance Responsibilities

If you have an e-commerce company or a brick-and-mortar location that offers shipping to out-of-state buyers, tax compliance will be more complicated for you. Unfortunately, nexus laws are not one-size-fits-all, and every state has different rates, rules, and regulations. Filing deadlines can also vary from state to state. While some require quarterly reporting, others mandate that you file every month. Make sure you understand what your obligations are and schedule important dates into your calendar ahead of time to avoid sales tax penalties.

3. Know What Your Exemptions Are

Depending on what type of products or services you sell, you may qualify for certain tax exemptions. For example, in California – furniture, gift wares, toys, antiques, and clothing are all subject to tax. Services that are involved in the creation or manufacturing of new personal property, such as landscape and contract services, are also subject to tax. However, certain food products, prescription medicines, and certain medical devices, are exempt from sales and use tax.

Who you’re selling to matters too. In most states, if you sell to government entities, nonprofit organizations or wholesalers – those transactions will be exempt from tax. Make sure you know the rules and regulations that apply to your goods and services to remain fully tax compliant.

4. Choose the Right Software

The right software tools will save you a lot of time, headaches, and manual work hours. They can also simplify tax compliance. Choose a payment processor and bookkeeping software that “play well together”. Doing so will help you avoid human error and will make it easier to operate your business more effectively. For example, QuickBooks and Square are fully integrated, and all transactions automatically populate across both platforms.

5. Consider Outsourcing Sales Tax Compliance

If you’re not well versed in tax compliance and aren’t up for the challenge of managing it yourself, that’s okay! You have options. For example, LumaTax is a small business champion, offering sales tax filing software for an affordable price. By taking compliance off your plate, you’ll have time to focus on what really matters… growing your business.

Though complex, sales tax compliance needs to be a focus as you prepare to launch your new business. Keep these five sales tax considerations in mind to avoid penalties, reduce your audit risk, and ensure that your business is, and continues to be, fully tax compliant.

Robert Schulte is the founder and CEO of LumaTax – a software company that makes sales tax filing a breeze for busy small business owners. Robert was formerly a Senior Tax Auditor for the State of California as well as the co-founder of Taxcient.

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